Adobe Stock To $334?

Our multi-factor assessment suggests that it may be time to buy more shares of ADBE stock. We have, overall, a positive view of the stock, and a price of $334 may not be out of reach. We believe there is not much to fear in ADBE stock given its overall Strong operating performance and financial condition. Considering stock’s Moderate valuation, we think it is Attractive.

Below is our assessment:

Stock-picking thrills fade fast when volatility hits. Smart financial advisors stay ahead by combining insights with action, channeling client capital into diversified portfolios that perform across cycles.

Let’s get into details of each of the assessed factors but before that, for quick background: With $108 Bil in market cap, Adobe is a diversified software company offering Creative Cloud and solutions in Digital Media, Digital Experience, Publishing, and Advertising to enterprise customers worldwide.

[1] Valuation Looks Moderate

This table highlights how ADBE is valued vs broader market. For more details see: ADBE Valuation Ratios

[2] Growth Is Strong

• Adobe has seen its top line grow at an average rate of 10.5% over the last 3 years
• Its revenues have grown 11% from $22 Bil to $24 Bil in the last 12 months
• Also, its quarterly revenues grew 10.5% to $6.2 Bil in the most recent quarter from $5.6 Bil a year ago.

This table highlights how ADBE is growing vs broader market. For more details see: ADBE Revenue Comparison

[3] Profitability Appears Very Strong

• ADBE last 12 month operating income was $8.7 Bil representing operating margin of 36.6%
• With cash flow margin of 42.2%, it generated nearly $10 Bil in operating cash flow over this period
• For the same period, ADBE generated nearly $7.1 Bil in net income, suggesting net margin of about 30.0%

This table highlights how ADBE profitability vs broader market. For more details see: ADBE Operating Income Comparison

[4] Financial Stability Looks Very Strong

• ADBE Debt was $6.6 Bil at the end of the most recent quarter, while its current Market Cap is $108 Bil. This implies Debt-to-Equity Ratio of 6.2%
• ADBE Cash (including cash equivalents) makes up $6.6 Bil of $29 Bil in total Assets. This yields a Cash-to-Assets Ratio of 22.4%

[5] Downturn Resilience Is Weak

ADBE has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• 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 $259.04

 
2020 Covid Pandemic

• 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.
• However, the stock fully recovered to its pre-Crisis peak by 20 May 2020

 
2008 Global Financial Crisis

• 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.
• However, the stock fully recovered to its pre-Crisis peak by 12 July 2013

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.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, 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. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.