2024-03-16 05:40:43 ET
Summary
- Previous assessment: Initially rated Adobe as a "hold" due to fair valuation at $595.7 and potential annual returns of 14-15%, based on Q3 2023 data.
- Recent stock performance: The stock fell post Q1 2024 earnings due to a slightly softer Q4 revenue forecast.
- Revenue growth and market dynamics: Adobe Creative Cloud's 40.81% annual revenue growth since 2014 and the expanding creator economy signal robust potential.
- Valuation and future outlook: DCF model projects a fair price of $660.81 and a 2029 price of $1,213.98, suggesting 34.2% upside and 24.4% annual returns, bolstering the "strong buy" rating.
Thesis
In my previous article about Adobe , Inc. (ADBE) I rated the stock as a hold citing that the stock had reached fair valuation when it was trading at $595.7 and the potential annual returns oscillated between 14-15% which was not a very favorable risk-reward situation. Since that article, the stock has fallen by 19.68% and the price now stands at $492.46, with the main cause being the slightly below-estimate forecast Adobe issued for Q2 2024.
My previous article was released just before Q4 2023 earnings , which were released on January 16. This means that the financial data present in my previous article was from Q3 2023 , which was released on September 27. The company reported Q1 2024 earnings on March 14 , 2024. Analyzing the stock and updating the financial models I have arrived at a fair price of $660.81 and a future price for 2029 of $1,213.98. Therefore I concluded that an opportunity has opened and I will upgrade Adobe from "hold" to "strong buy"....
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For further details see:
Adobe Has Reached Undervaluation And Its Recent Dip Is A Golden Opportunity