5% Downside to Adobe’s Stock if Microsoft and Apple Gain in Creative Software Market
Adobe (NASDAQ:ADBE) competes with Microsoft (NASDAQ:MSFT), Quark, Apple (NASDAQ:AAPL) and Corel in the creative software market. Such software is used by creative professionals such as graphic designers and photographers, as well as hobbyists, to create visually rich print and online content. Adobe’s share in the creative software market has been volatile in the past, increasing during the launch of a new software and declining thereafter.
We estimate that there could be a downside of 5% to the $38 Trefis price estimate for Adobe’s stock if increased competition causes its Creative Software market share to decline in the long term instead of being relatively stable as we forecast.
Adobe’s Creative Software Market Share Has Been Volatile
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Adobe’s creative software includes popular products like:
- Photoshop for images and animation
- Dreamweaver for web design
- Flash Professional for interactive rich content
- InDesign for print layouts and digital publishing
In 2008, Adobe’s Creative Software market share increased due to the success of Creative Suite 3, which benefited from Adobe’s acquisition of Macromedia. With the acquisition, Adobe added Flash and Dreamweaver to its Creative Suite for the first time.
In 2009, Adobe lost market share due to the failure of Creative Suite 4, which did not introduce sufficiently new and attractive features compared to the prior version of the suite.
Creative Suite 5, however, remains important for Adobe’s market share in the short term. We expect Adobe’s market share will continue to be volatile and hover around 44% by the end of Trefis forecast period.
Three Reasons for Future Market Share Decline
Below we discuss three reasons why competition could cause Adobe’s creative software market share to decline in the future.
1. Microsoft Expression Studio is priced cheaper
Microsoft Expression Studio directly competes with Adobe’s Creative Suite of products. While Adobe’s Creative Suite was priced at around $730 in 2009, Microsoft’s Expression Studio was priced cheaper at around $600. This could give Microsoft an edge over Adobe.
2. QuarkXpress 8 is simpler and involves less training costs
Quark’s QuarkXpress is a market leader in the professional page layout market and competes with Adobe InDesign, a software used for magazines and newspaper publishing. The advantage of QuarkXpress 8 over Adobe InDesign is that it is easier to operate and saves training cost for companies. InDesign, on the other hand, is more complex and requires more training to use.
3. Apple Final Cut Pro is gaining popularity over Adobe Premiere
Adobe premiere is the video-editing software that competes with Apple’s Final Cut Pro. Lately, Apple’s software has gained popularity as Adobe’s products continue to face integration issues with Mac desktops and notebooks.
5% Downside to Adobe’s Stock if Creative Software market share declines
We estimate that Adobe’s creative software accounts for more than 50% of our price estimate for Adobe’s stock. Although we forecast that Adobe’s Creative Suite market share will hover around 44%, there could be a downside of $2 (5%) to the $38 Trefis Price estimate for Adobe’s stock if competition causes its market share to decline to 40% by the end of Trefis forecast period.
You can modify our forecast above to see how Adobe’s stock will be impacted if it were to decline in the long run rather than being stable as we forecast.
For additional analysis and forecasts, here is our complete model for Adobe’s stock.