Has Adobe Stock Quietly Become a Value Opportunity?

We think Adobe (ADBE) stock could be a good value buy. It is currently trading lower than average valuation, and has reasonable revenue growth and strong margins to go with its modest valuation.

Buying stocks with low valuations or trading well below their peaks but maintaining strong margins allows investors to capture mean reversion and valuation re-rating potential. The downside risk is potentially less because high-margin businesses can sustain earnings and recover faster when sentiment or market conditions improve

What Is Happening With ADBE

ADBE stock is now 37% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago, and also trades at a P/E (Price-to-Earnings) ratio that is below S&P 500 median.

The stock may not reflect it yet, but here is what’s going well for the company. High subscription retention and Creative Cloud price adjustments, including new AI features, sustain solid operating cash flow and gross margins. While Annual Recurring Revenue growth is projected to moderate slightly to 10.2% for FY2026 from 11.5% in FY2025, new AI-driven product capabilities like Firefly continue to increase user engagement and generative credit consumption. The valuation discount reflects market caution around AI innovation costs and competitive intensity.

ADBE Has Strong Fundamentals

• Reasonable Revenue Growth: 10.5% LTM and 10.5% last 3 year average.
• Strong Margin: Nearly 35.6% 3-year average operating margin.
• No Major Margin Shock: Adobe has avoided any large margin collapse in the last 12 months.
• Modest Valuation: Despite encouraging fundamentals, ADBE stock trades at a PE multiple of 17.0

Below is a quick comparison of ADBE fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While ADBE stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. Adobe’s stock took some serious hits during market crises. It lost about 72% in the Dot-Com bubble and 67% in the Global Financial Crisis. The inflation shock in 2022 wasn’t far behind, with a 60% drop. Even the less severe pullbacks, like in 2018 and the Covid pandemic, still shaved off more than 25%. So, no matter how solid the company looks, big sell-offs tend to hit even top names hard. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ADBE Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell ADBE Stock.

Stocks Like ADBE

Not ready to act on ADBE? Consider these alternatives:

1. Paychex (PAYX)
2. Lululemon Athletica (LULU)
3. Global Payments (GPN)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Meaningfully below 1Y high
3. Current P/S < last few year average
4. Strong operating margin
5. P/E ratio below S&P 500 median

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 12.7% and 25.8% respectively
• Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
• Strategy consistent across market cycles

A Multi Asset Portfolio Gives You Safer Smarter Growth

Individual stocks can soar or tank but multi asset exposure steadies the ride. A spread out portfolio captures upside while limiting the damage from any one market.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices