Should You Hold Adobe Systems (ADBE)?

[View in browser]( [The Spill Logo] BROUGHT TO YOU BY: [Logo]( Proprietary Data Insights Financial Pros’ Top Software Application Stock Searches in the Last Month Rank Ticker Name Searches #1 [ADBE]( Adobe Systems 41 #2 [SHOP]( Shopify 20 #3 [CRM]( Salesforce.com 18 #4 [INTU]( Intuit 13 #5 [NOW]( ServiceNow 12 #ad [Unlock Financial Clarity with The Juice]( Brought to you by [Stock Earnings]( [Honor Their Bravery with a Better Trading Arsenal]( [Stock Earnings - Honor Their Bravery with a Better Trading Arsenal]( This Independence Day, we're doing more than remembering... We're empowering traders like you with our Premium Membership for pennies. For just $4, you get 12 months of access to tools that could transform your trading. Directional Options Trade Alerts, Trade Ideas Tool, Earnings Screener Software... All at your fingertips. All designed to give you an advantage when placing your next trade. [Don't let this opportunity slip away. Click here to learn more.]( Should You Hold Adobe Systems (ADBE)? While Nvidia and Microsoft bask in the AI spotlight, Adobe Systems (ADBE) has been quietly revolutionizing the creative world with its own AI innovations. From Photoshop's mind-bending generative fill to Acrobat's AI-powered document analysis, Adobe is proving it's not just a bystander in the AI race. The company's recent Q2 results showcased a solid 10% year-over-year revenue growth, hitting a record $5.31 billion. But with the stock down slightly year-to-date, investors are asking: Is Adobe still a creative powerhouse worth holding onto, or has the AI hype pushed it too far? Our TrackStar data shows a surge in financial professionals searching for Adobe alongside terms like "generative AI" and "creative automation"... ...which begs the question: Is Adobe positioning itself as the sleeper hit in the AI revolution? Adobe’s Business Ever wondered how your favorite Instagram filters or sleek website designs come to life? Chances are, Adobe's software played a pivotal role. As the mastermind behind ubiquitous tools like Photoshop and Acrobat, Adobe has been shaping the digital landscape for over four decades, empowering creatives and businesses alike to realize their visions. Adobe's fingerprints are everywhere in our digital world, from the dazzling special effects in blockbuster movies to the seamless PDF documents we use daily. The company serves a diverse clientele, ranging from solo artists and small businesses to Fortune 500 companies and government agencies. With a global presence spanning more than 40 countries, Adobe's influence on digital innovation knows no borders. Adobe segments its business into three main areas: - Digital Media (74% of total revenues) - This is the bread and butter of Adobe, housing the Creative Cloud and Document Cloud. Think Photoshop for stunning visuals, Illustrator for eye-catching graphics, and Acrobat for all things PDF. - Digital Experience (25% of total revenues) - Here's where Adobe flexes its marketing muscle, offering tools for analytics, content management, and advertising that help businesses create personalized customer experiences. - Publishing and Advertising (1% of total revenues) - A smaller slice of the pie, this segment includes legacy products for technical publishing and web conferencing. [Revenue] [Source: Adobe Q2 2024 Datasheet]( Adobe's latest financial report card shows it's still at the top of its game. In the quarter ending May 31, 2024, the company raked in a record $5.31 billion in revenue, growing 10% year-over-year. What's driving this success? A surge in demand for its Digital Media and Digital Experience offerings, particularly in Creative Cloud and Document Cloud subscriptions. Adobe isn't resting on its laurels. The company is diving headfirst into the AI revolution with offerings like Adobe Firefly and Acrobat AI Assistant, proving it's still a trailblazer in the digital experience realm. Financials [Financials] Source: Stock Analysis Adobe’s revenue growth has been nothing short of remarkable, up double digits every year for the past decade. At the same time, margins held fairly constant, with profit and free cash flow margins only recently taking a hit from an acquisition termination fee last quarter. Otherwise, they’re virtually unchanged. With very little debt, management uses the $6 billion to $7 billion a year in cash flow to repurchase shares, giving shareholders a roughly 2.8% return. Valuation [Valuation] Source: Seeking Alpha Adobe’s performance comes with a premium valuation. The stock trades at over 50x trailing twelve-month earnings, 47x forward estimates, and 38x operating cash flow. Yet, it’s actually cheaper than most of its peers, with Intuit (INTU) discounted slightly more on an operating cash flow multiple, and Salesforce.com (CRM) cheaper on an earnings and operating cash flow multiple. Growth [Growth] Source: Seeking Alpha While Adobe doesn’t put up the CAGR like Shopify (SHOP) or ServiceNow (NOW), its stable margins allowed it to translate revenue growth directly into profitability. The only knock is its latest EPS and cash flow performance, which again was hurt by the $1 billion termination fee. Profitability [Profits] Source: Seeking Alpha Across the board, Adobe runs the best margins or close to it compared to all its peers. That’s allowed it to deliver incredible returns on equity, assets, and total capital. [Biggest Prediction of My 50-Year Career on Wall Street]( Today, I'm going public with something I've never said on national air... not in any of my appearances on Fox Business or CNBC. I'm a little nervous about it... But I stand behind the big prediction I'm making right now... because I've never been more confident that a strange day I foresee coming to America could make you a great deal of money. Today, my newest prediction is even bigger. In fact, I'm going one step further. I'm giving away the ticker symbol of the #1 stock to buy now... using the same system that bears my name on every Bloomberg terminal on Wall Street. [Click here to learn the full details.]([Ad] Our Opinion 8/10 Other than a premium valuation, we see little reason not to own Adobe. The company consistently delivers high-quality growth and earnings, which it uses for generous share buybacks. With the stock down slightly year-to-date, we see this as an opportunity to pick up shares on the cheap. 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