Android’s a Growth Engine for Adobe’s Stock
Adobe (NASDAQ:ADBE) recently announced its Q4 2010 earnings and highlighted the importance of mobile devices like tablets for its future growth. [1] Although Apple does not currently support Flash, Google’s (NASDAQ:GOOG) Android market share gain in the tablets market will be a key growth engine for Adobe as Android devices supporting Adobe’s software continues to grow. Flash Professional is a key component of its Creative Suite software, whose latest version 5 was released in June 2010. Adobe’s Creative Suite of software competes with Quark’s QuarkXpress, Apple’s (NASDAQ:AAPL) Aperture and Corel’s (NASDAQ:CREL) Draw.
We estimate that the Creative Software is the most valuable business of Adobe and constitutes around 55% of the $37.43 Trefis price estimate for Adobe stock, which is about 10% higher than the current market price.
[trefis_forecast ticker=”ADBE” driver=”0057″]
Flash a Key component of Creative Suite
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Some of the popular Creative Software products for Adobe are:
- Flash Professional, used for interactive rich content,
- Photoshop, used for images and animation,
- Dreamweaver, used for web designing, and
- InDesign, used for print layouts and digital publishing.
Adobe’s Creative Suite of software is used by creative professionals such as graphic designers and photographers as well as hobbyists to create visually rich print and online content. Such content includes photographs, videos, animations and mobile content.
Adobe dominates the Creative Software market
Adobe typically releases a new version of Creative Suite software every 18 months. Traditionally, Adobe has seen a spike in sales immediately following a new release. Adobe’s market share has been volatile in the past and has ranged between 40% to 50%. We expect this volatility to continue in future and expect its market share to reach around 41% by the end of Trefis forecast period.
Android’s gain key to Adobe stock
Since Flash is not supported by Apple, Adobe’s fortunes in the tablet market will be dependent on Android. Although Apple’s iPad dominated the tablet market in 2010, [2] it is bound to get more competition from Android in future (See iPad’s Challenge for Next Year). It will be interesting to see if Android could produce the same success in tablet markets that it produced in the smartphone market.
Android overtook iPhone OS during 2010 and its smartphone market share increased from a mere 3.5% in Q3 2009 to around 26% in Q3 2010 while the iPhone’s actually declined a little at around 17% during the same period, according to Gartner. [3] If Android does indeed help Adobe increase its presence in the tablet market, it could boost Adobe stock.
In the scenario where Adobe’s Creative Software market share increases to 50% by the end of Trefis forecast period, there could be an upside of 10% to our estimate for Adobe stock.
You can see the complete $37.43 Trefis Price estimate for Adobe stock here.
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