Should you buy Adobe stock? (March 2024)

Adobe stock analysis. Ticker: $ADBE

Adobe reported earnings last week and the stock tumbled 14%. At the latest share price the company has a market cap of 232 billion dollars. With 6.8 billion of cash and investments and 3.6 billion of long term debt, the enterprise value is 228 billion.

Revenue over the last 12 months comes to 20 billion with 4.8 billion of net income and 7 billion of free cash flow. So Adobe stock is now trading at around 48 times earnings and 33 times free cash flow.

Despite falling 14%, this wasn’t a bad report from Adobe. Revenue increased 11% and adjusted operating income grew 16%. Gross margins increased to 88.6%, among the very best in the world. And Adobe announced a plan to buy back $25 billion dollars worth of stock. That figure is enough to buy back almost 10% of the company at current prices.

So why did the stock fall?

The obvious answer is that Adobe’s second quarter outlook came in below expectations. The company thinks revenue will grow 9.5% year-over-year with adjusted earnings growth of 12%. And one percent of that should come from stock repurchases.

#stocks #investing #adobestock #3mb

[michizb]

Agreed that pe ratio will be harder to maintain in the future because creativity is set to change with AI and I don't see Adobe catching up with AI tech any time soon. I maybe wrong

[momo]

Great videos! Can you perhaps try do some before earnings? That would be a very interesting context to potentially enter earnings with.

[andrewtorabi]

i really think meta will eat adobe's lunch. Larger user base with heavy rnd AI investments

[momo]

Can you do Baozun please it's going to be releasing earnings on Thursday! Great stock potentially!

[WealthGameNation]

Hey dude, you have a flaw in either your logic or your communication with your audience (in every video). The 10% PA that you calculated is the increase to your CAGR to NI not to stock price. This is not 1 to 1. With your IDENTICAL assumption, the stock price appreciation would come to 7.4% PA, and the discounted price of ADBE today is around 11.3% above fair value (according to your calculation). How I calculated this? I took your 8B of NI divided it by future shares outstanding (assuming 1% reduction PA) which comes down to 430M shares) and multiplied with your P/E assumption of 40. Therefore future share price is 744$ and discounting it back to today, you would get 462$ which is 11.3% below current price. :) You're welcome! :)