Is It Time To Buy Adobe Stock?

Adobe Stock (NASDAQ: ADBE) has experienced a significant 27% year-to-date decline. This correction has been driven by several factors, including market concerns over intensified competition from AI-native companies and skepticism regarding Adobe’s capacity to effectively monetize its substantial AI investments.

However, after reviewing this decline, the critical question remains: Should investors buy or sell ADBE stock?

We believe that ADBE stock is currently attractive and represents a compelling buy opportunity at its present price, around $320. We see minimal long-term cause for concern regarding Adobe’s fundamentals, which, coupled with its current Moderate valuation, makes it a strong investment candidate.

This conclusion is based on a comprehensive comparison of ADBE’s current valuation against its recent operating performance and its current and historical financial stability. Our detailed analysis of Adobe, across the key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience, indicates that the company maintains a Strong operating performance and financial condition. Further details are provided in the following sections.

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Image by ZT_OSCAR from Pixabay

How Does Adobe’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, ADBE stock looks slightly expensive compared to the broader market.

• Adobe has a price-to-sales (P/S) ratio of 7.1 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 17.2 compared to 20.5 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 23.7 vs. the benchmark’s 23.5

How Have Adobe’s Revenues Grown Over Recent Years?

Adobe’s Revenues have seen notable growth over recent years.

• Adobe has seen its top line grow at an average rate of 10.5% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have grown 10.7% from $21 Bil to $23 Bil in the last 12 months (vs. growth of 6.1% for S&P 500)
• Also, its quarterly revenues grew 10.7% to $6.0 Bil in the most recent quarter from $5.4 Bil a year ago (vs. 7.1% improvement for S&P 500)

How Profitable Is Adobe?

Adobe’s profit margins are considerably higher than most companies in the Trefis coverage universe.

• Adobe’s Operating Income over the last four quarters was $8.4 Bil, which represents a considerably high Operating Margin of 36.2% (vs. 18.8% for S&P 500)
• Adobe’s Operating Cash Flow (OCF) over this period was $9.8 Bil, pointing to a considerably high OCF Margin of 42.2% (vs. 20.5% for S&P 500)
• For the last four-quarter period, Adobe’s Net Income was $7.0 Bil – indicating a considerably high Net Income Margin of 30.0% (vs. 13.1% for S&P 500)

Does Adobe Look Financially Stable?

Adobe’s balance sheet looks very strong.

• Adobe’s Debt figure was $6.6 Bil at the end of the most recent quarter, while its market capitalization is $134 Bil (as of 11/30/2025). This implies a very strong Debt-to-Equity Ratio of 4.0% (vs. 20.4% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $5.9 Bil of the $29 Bil in Total Assets for Adobe.  This yields a strong Cash-to-Assets Ratio of 20.7% (vs. 7.0% for S&P 500)

How Resilient Is ADBE Stock During A Downturn?

ADBE stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on ADBE stock? Our dashboard – Can Adobe Stock Recover If Markets Fall? – has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• ADBE stock fell 60.0% from a high of $688.37 on 19 November 2021 to $275.20 on 30 September 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is 634.76 on 4 February 2024 and currently trades at around $320

COVID-19 Pandemic (2020)

• ADBE stock fell 25.6% from a high of $383.28 on 19 February 2020 to $285.00 on 12 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 20 May 2020

Global Financial Crisis (2008)

• ADBE stock fell 66.7% from a high of $48.00 on 24 October 2007 to $15.98 on 3 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 12 July 2013

Putting All The Pieces Together: What It Means For ADBE Stock

In summary, Adobe’s performance across the parameters detailed above are as follows:

• Growth: Strong
• Profitability: Very Strong
• Financial Stability: Very Strong
• Downturn Resilience: Weak
• Overall: Strong

Overall, Adobe has demonstrated strong performance across the critical parameters assessed.

Considering the company’s solid fundamentals and the stock’s current Moderate valuation, we find the investment thesis highly attractive. This strengthens our final conclusion that ADBE is a good stock to buy.

While ADBE stock looks promising, investing in a single stock without comprehensive analysis can be risky. Consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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