High Margins, 48% Discount: Buy Adobe Stock Now

Adobe (ADBE) stock might be a good buy now. Why? Because you get high margins – reflective of pricing power and cash generation capacity – for a discounted price. Companies like this generate consistent, predictable profits and cash flows, which reduce risk and allow capital to be reinvested. The market tends to reward that.

What Is Happening With ADBE

ADBE stock is now 48% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago.

The stock may not reflect it yet, but here is what’s going well for the company. Adobe’s fiscal 2025 saw operating cash flows exceed $10 billion, fueled by expanding customer adoption of AI-powered features like Firefly, which drove a 35% increase in monthly active users to over 70 million. The company also reported record bookings for deals over $1 million in Q4 2025, with a more than 25% rise in customers generating over $10 million in annual recurring revenue. Strategic pricing adjustments for Creative Cloud and photography plans in 2025 further strengthened recurring revenue. Furthermore, the planned acquisition of Semrush in the first half of 2026 signals a move to capitalize on the industry shift towards generative AI search, where traffic to retail sites from AI sources surged by 1,200% in October 2025.

ADBE Has Strong Fundamentals

• Recent Profitability: Nearly 42.2% operating cash flow margin and 36.6% operating margin LTM.
• Long-Term Profitability: About 39.1% operating cash flow margin and 35.6% operating margin last 3-year average.
• Revenue Growth: Adobe saw growth of 10.5% LTM and 10.5% last 3-year average, but this is not a growth story
• Available At Discount: At P/S multiple of 4.7, ADBE stock is available at a 48% discount vs 1 year ago.

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

*LTM: Last Twelve Months

Don’t Expect A Slam Dunk, Though

While ADBE stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. ADBE fell about 72% in the Dot-Com crash, 67% in the Global Financial Crisis, and 60% during the inflation shock in 2022. Even the less severe dips in 2018 and the Covid selloff came close to 25%. This shows that no matter how strong a company looks, it can still take major hits in tough markets. 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.

If you want more details, read Buy or Sell ADBE Stock.

How We Arrived At ADBE Stock

ADBE piqued our interest because it meets the following criteria:

1. Greater than $10 Bil in market cap
2. High CFO (cash flow from operations) margins or operating margins
3. Meaningfully declined in valuation over the past 1 year

But if ADBE doesn’t look good enough to you, here are other stocks that also check all these boxes:

1. T-Mobile US (TMUS)
2. Salesforce (CRM)
3. Intuit (INTU)

Notably, a portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:

• Average 12-month forward returns of nearly 19%
• 12-month win rate (percentage of picks returning positive) of about 72%

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