Meta Crushes Its Earnings Report

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Meta Crushes Its Earnings Report Whew! Yesterday was a brutal day for stocks with the Nasdaq plummeting by 2.5%. Microsoft’s rock-solid results didn’t do enough to compensate for Alphabet’s subpar cloud numbers. Texas Instruments also issued a bearish forecast. Wall Street is now worried about a potential recession around the corner. - “The question now turns to earnings as earnings drive stock prices,” said Howard Ward, chief investment officer of Growth Equities and portfolio manager at Gabelli Funds. - “This is where the rubber meets the road. A recession would result in higher unemployment, less consumer spending, slower gross domestic product growth and lower earnings, which implies lower stock prices.” However, earnings have been solid so far. Meta and IBM beat on revenue and earnings estimates. But Alphabet’s 9.5% decline was difficult to shake off. The S&P 500 finished the day below a key support line at 4,200. Now, we will get third-quarter GDP coming out this morning and a new inflation reading tomorrow. Meta absolutely crushed its quarter with a revenue growth of 23%. EPS came in at $4.39 versus $3.63 expected. Revenue also topped. Its ad business has rebounded, helping net income to soar by 164% from a year earlier. It is good news since many companies often cut advertising first if they need to cut costs. This may indicate that businesses are willing to spend for growth. As a wild card, Israel Prime Minister Benjamin Netanyahu said in a televised address that Israel is preparing for a ground invasion of Gaza. The timing wasn’t provided, but there is a risk of a broad escalation around the Middle East.  When in Doubt, Go for A Tech Company With Stable Revenue Today’s Stock Pick: Adobe Inc. ([ADBE]() Did you know that Steve Jobs tried to buy Adobe for $5 million during its first year of being in business? The founders, John Warnock and Charles Geschke, refused the offer but agreed to sell him shares worth 19 percent of the company. And these two founders eventually built Adobe into one of the most admirable companies in the world. Adobe’s innovation DNA has led to some iconic products like Photoshop and PDF. In fact, it owns a whopping total of 8,204 patents globally -- with 6,703 patents active. The company still dominates its field to this day. The stock fell 46% from its all-time high, making it a wonderful time to buy while it is cheap. Subscription-based business: The best thing about Adobe is that about 92% of its revenue came from subscription products. What does this mean? Stable and consistent revenue. Adobe is divided into three main business units – Adobe Creative Cloud, Document Cloud, and Experience Cloud. Creative Cloud holds some of the insanely popular applications like Photoshop, Illustrator, After Effects, and many more. Users just need to pay a subscription fee to get access to these apps. And of course, Photoshop overwhelmingly dominates its category. It has become a “verb.” Adobe said, "90% of the world's creative professionals use Adobe Photoshop." This segment has a massive Total Addressable Market of ~$41 billion in 2023, and still growing. Adobe projects a 53% growth in TAM to ~$63 billion in 2024. (Source: Adobe) Document Cloud, the second business unit, offers a bunch of services in electronic documents. Adobe invented PDF but made it free for the public to use. But its services make it easy for people to convert different files to PDFs. Plus, it offers e-signature services that will continue to become a vital part of almost any business operation. Adobe also believes that this industry’s TAM will grow by 52% from 2023 to 2024. (Source: Adobe) Experience Cloud has tremendous potential for Adobe. It offers marketing software that makes it possible for hyper-personalized messaging, where certain customer segments will receive special messages at the right time. Adobe’s platform uses data analytics to track a buyer’s journey from the beginning to the end. Plus, its Marketo software allows marketers to create email automation, journey campaigns, and ongoing campaigns. Notably, it pioneered the concept of “Dynamic Content” which allows marketers to send personalized email content based on a customer’s industry. Adobe estimates its TAM to be at ~$85 billion and could grow to ~$110 billion in 2024. (Source: Adobe) The Figma acquisition: Of course, we cannot talk about Adobe without mentioning its huge acquisition of Figma. The stock plunged (-25%) when it was announced. Listen, Figma offers collaborative software for developers and creators, and it spreaded like wildfire. Adobe had no choice but to overpay to acquire before letting the startup get too big to disrupt Adobe’s lucrative business. The purchase price was $20 billion for a company with $190 million revenue in 2022. It looks very high but it’s all about distribution. For example, look at how fast Microsoft Teams grew its daily active users versus Slack: (Source: Chart) Is Teams a better app than Slack? Well, we are not a tech review site. But there’s no doubt about it – the growth exploded because of Microsoft’s superior distribution. Its user base is so massive that within a click of a button, it can grow an app’s adoption exponentially. Reid Hoffman, the co-founder of LinkedIn, wrote in his book Blitzscaling: - “The cold and unromantic fact is that a good product with great distribution will almost always beat a great product with poor distribution.” That’s what you have here with Adobe. It may overpay for Figma based on the current numbers, but it can quickly change once Adobe leverages its distribution to grow its user base. Bottom line: Adobe is one of the best compounding stocks in the world. With its subscription-based products, you get a very stable revenue stream. Adding to its stability is how critical Adobe’s products are for many professions. For example, virtually any designer uses Photoshop. Product stickiness makes it tough for professionals to leave the Adobe ecosystem. With the stock being 46% off its all-time high, now is the rare time to buy this company at a discount.   [CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS](     © All Rights Reserved, Trade Alliance If you no longer want to receive these messages, you may [click here]( to unsubscribe.