Is Now the Right Moment to Consider Adobe After a 26.5% Slide in 2025?

• Ever wondered if now is the moment to scoop up Adobe stock, or if it is still trading at a premium? You are not alone in asking whether the current price offers real value or not.
• Shares have dipped 8.3% over the past month and are down 26.5% year-to-date, which could catch the eye of bargain hunters or those concerned about shifting risks.
• Recently, headlines have focused on Adobe's bold investments in artificial intelligence and ongoing product innovation. These moves have sparked both optimism about future potential and questions about how quickly new technologies will contribute to meaningful growth.
• When it comes to valuation, Adobe currently scores 5 out of 6 for being undervalued by conventional checks, but as we will discuss, the real insight may come from weighing these methods against new ways of looking at value later in the article.

Find out why Adobe's -36.7% return over the last year is lagging behind its peers.

Approach 1: Adobe Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model works by projecting a company's expected future cash flows and then discounting those amounts back to their value in today's dollars. This creates an estimate of the business's intrinsic worth based on its likely ability to generate cash over time.

According to this model, Adobe's current Free Cash Flow stands at $9.5 billion. Analysts forecast strong growth ahead, with projections reaching $13.3 billion in Free Cash Flow by 2029. While analyst estimates only extend five years, subsequent years are extrapolated to give a full picture, with projections nearing $17.8 billion by 2035.

Based on these cash flow projections and the 2 Stage Free Cash Flow to Equity model, the DCF analysis estimates Adobe's intrinsic value at $580.46 per share. This represents a sizable 44.1% discount compared to recent market prices, signaling that the stock could be substantially undervalued using conventional cash flow metrics.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Adobe is undervalued by 44.1%. Track this in your watchlist or portfolio, or discover 926 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Adobe.

Approach 2: Adobe Price vs Earnings (PE Ratio)

For profitable companies like Adobe, the Price-to-Earnings (PE) ratio is a widely used valuation metric because it directly relates a company's share price to its per-share earnings. This helps investors quickly gauge how much they are paying for each dollar of profit the business generates.

The “right” PE ratio for a company depends not just on its recent performance, but also on its future growth prospects and the risks it faces. Faster-growing companies and those with more stable earnings typically command higher PE ratios, while slower growth or higher risk tends to lower what is considered fair.

Currently, Adobe trades at a PE ratio of 19.5x. For context, the average for the broader software industry is 28.8x, and Adobe’s peers command an even higher average of 54.1x. At first glance, this suggests Adobe is valued more conservatively than many of its peers and the overall sector.

Simply Wall St’s proprietary “Fair Ratio” takes the analysis further and sets Adobe’s fair PE at 37.8x. Unlike basic comparisons, this Fair Ratio accounts for Adobe’s own earnings growth forecasts, profitability, industry position, and risk profile, making it a more tailored benchmark for fair value.

Comparing Adobe’s current PE of 19.5x with its Fair Ratio of 37.8x points to the stock being undervalued on this measure, since investors are paying less than what would be considered fair given the company’s outlook and fundamentals.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1430 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Adobe Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a method that makes stock analysis more personalized and insightful by connecting your view of a company’s story directly to its financial forecasts and fair value estimate.

A Narrative is simply your perspective on where a business like Adobe is headed, with your own assumptions for future revenue, earnings, margins, and what a “fair” price looks like, crafted into a story behind the numbers.

This approach turns investing into a dynamic decision process, where you can see not just today’s valuation ratios, but also the reasoning—the “why”—tailored to your beliefs about the company’s future and risk landscape.

On Simply Wall St’s platform, Narratives are easily accessible on each company’s Community page and are used by millions of investors to map their thinking, quickly compare Fair Value to the current Price, and decide whether to buy, hold, or sell as new information emerges.

Because Narratives update automatically as companies report earnings or news breaks, your view stays relevant and actionable, helping you act on real developments, not old analysis.

For example, for Adobe, different investors recently set their Fair Value from as low as $380 up to $605 per share, illustrating how your own narrative can reflect optimism, caution, or anything in between, based on your outlook and confidence in the company’s next chapter.

Do you think there's more to the story for Adobe? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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