Adobe Earnings: Priced Too Perfectly

Sep. 13, 2024 4:23 AM ETAdobe Inc. (ADBE) StockADBE9 Comments
(7min)

Summary

  • Adobe's outlook led to a 9% sell-off, with bulls seeing value and bears questioning growth, making it a battleground stock.
  • Adobe's AI enhancements improve productivity, but rising competition in AI-driven tools threatens its dominance and growth prospects.
  • Despite guiding for 11% y/y revenue growth, Adobe's growth is slowing, and its valuation at 25x next year's EPS isn't enticing.
  • Adobe's stock buybacks raise questions about capital allocation, with limited upside due to a fully optimized cost structure and modest revenue growth.
  • Looking for a helping hand in the market? Members of Deep Value Returns get exclusive ideas and guidance to navigate any climate. Learn More »

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bennymarty

Investment Thesis

Adobe (NASDAQ:ADBE) delivered a mediocre outlook with its fiscal Q3 2024 results, which led to a 9% sell-off.

Even though its outlook wasn't too far off analysts' own expectations, this has been a battleground stock for a long time.

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Michael Wiggins De Oliveira is an inflection investor. This means buying into cheap companies at the moment when their narrative is changing and the business is on a path toward becoming significantly more profitable over the next year.

With a focus on tech and “the Great Energy Transition (including uranium)”, Michael runs a concentrated portfolio with approximately 15 to 20 stocks and an average holding period of 18 months.

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Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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