Adobe (ADBE) AI Stock Analysis

• Market Cap: $148.70B
• Dividend Yield: N/A
• Average Volume (3M): 3.82M
• Price to Earnings (P/E): 22.4
• Beta (1Y): 1.13
• Revenue Growth: 10.69%
• EPS Growth: 35.23%
• Country: US
• Employees: 30,709
• Sector: Technology
• Sector Strength: 85
• Industry: Software - Infrastructure
• EPS (TTM): 5.31
• Shares Outstanding: 424,200,000
• 10 Day Avg. Volume: 3,955,858
• 30 Day Avg. Volume: 3,817,852
• PEG Ratio: 8.80
• Price to Book (P/B): 16.35
• Price to Sales (P/S): 10.73
• P/FCF Ratio: 29.48
• Enterprise Value/Market Cap: 1.20
• Enterprise Value/Revenue: 7.72
• Enterprise Value/Gross Profit: 8.66
• Enterprise Value/Ebitda: 18.72
• 1Y Price Target: $468.41
• Price Target Upside: 34.08% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 30

• Rating: 78 Outperform
• Price Target: $398.00 ▲(13.92% Upside)

Adobe's strong financial performance and positive earnings call are the most significant factors driving the overall stock score. The company's robust profitability, efficient capital management, and strategic focus on AI integration position it well for future growth. Technical analysis presents mixed signals, indicating potential short-term volatility. The valuation is reasonable given Adobe's growth prospects, though competitive pressures in the AI space pose a challenge.

Positive Factors

Revenue Growth

Consistent revenue growth underscores Adobe's strong market position and product demand, particularly in its Digital Media segment, indicating sustainable business expansion.

AI Innovations

Adobe's strategic focus on AI-driven solutions enhances its competitive edge, driving future revenue through innovative products like Acrobat AI Assistant and Firefly.

Cash Flow Management

Strong cash flow from operations highlights Adobe's effective cash management, enabling reinvestment in growth initiatives and providing financial stability.

Negative Factors

Copyright Concerns

Ongoing copyright issues with AI-generated content could pose legal and reputational risks, potentially impacting Adobe's AI strategy and market perception.

Monetization Challenges

Early-stage monetization of AI features suggests potential revenue delays, requiring strategic focus to fully capitalize on AI investments and enhance profitability.

Equity Ratio Decline

A declining equity ratio may indicate reduced financial flexibility, potentially affecting Adobe's ability to leverage assets for growth and investment opportunities.

Adobe Business Overview & Revenue Model

Company Description

Adobe Inc. is a multinational software company headquartered in San Jose, California, known for its innovative products in digital media and digital marketing. The company operates primarily in two segments: Digital Media and Digital Experience. Core products include Adobe Creative Cloud, which encompasses industry-leading design and multimedia software such as Photoshop, Illustrator, and Premiere Pro, as well as Adobe Document Cloud, which includes tools like Acrobat and Adobe Sign for document management and e-signatures. Additionally, the Digital Experience segment offers a suite of analytics, marketing, and advertising solutions, helping businesses optimize their digital engagement.

How the Company Makes Money

Adobe generates revenue primarily through subscription-based services. The Digital Media segment, which includes Creative Cloud and Document Cloud, constitutes the bulk of the company's revenue, with customers paying recurring fees for access to software and services. Adobe's transition to a subscription model has led to a steady increase in Annualized Recurring Revenue (ARR). The Digital Experience segment contributes additional revenue through its suite of marketing and analytics solutions, which businesses purchase to enhance their digital marketing efforts. Furthermore, Adobe establishes strategic partnerships with various enterprises and technology companies, enhancing its market reach and driving sales through integrated solutions. The company's focus on innovation and expansion into new markets, such as artificial intelligence and machine learning, also plays a significant role in its revenue growth.

Adobe Financial Statement Overview

Summary

Adobe demonstrates strong financial performance with consistent revenue growth, high profitability margins, and effective cash flow management. The company's low leverage enhances its financial stability, making it well-positioned for sustainable growth. Minor fluctuations in the equity ratio do not significantly impact its robust financial health.

Income Statement

Adobe's income statement reflects strong financial performance with consistent revenue growth, highlighted by a 5.11% revenue growth rate in the TTM (Trailing-Twelve-Months) over the previous year. The company maintains solid profitability with a gross profit margin of 89.23% and a net profit margin of 30.39% in the TTM. Adobe's EBIT and EBITDA margins are also robust at 36.37% and 38.57% respectively, indicating efficient operational management.

Balance Sheet

Adobe has a strong balance sheet characterized by a low debt-to-equity ratio of 0.035 in the TTM, reflecting minimal leverage and a solid equity base. The company's return on equity stands at 60.01%, showcasing strong profitability relative to shareholder investments. However, the equity ratio has decreased slightly to 40.74%, pointing to a moderate reduction in equity relative to total assets.

Cash Flow

Adobe's cash flow statements reveal robust cash generation capabilities with a free cash flow growth rate of 20.61% in the TTM. The operating cash flow to net income ratio is healthy at 1.40, indicating strong operating efficiency. Furthermore, the free cash flow to net income ratio of 1.37 underscores the company's ability to convert revenue into cash effectively.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	23.18B	21.50B	19.41B	17.61B	15.79B	12.87B
Gross Profit	20.66B	19.15B	17.05B	15.44B	13.92B	11.15B
EBITDA	9.56B	7.96B	7.78B	7.05B	6.67B	5.05B
Net Income	6.96B	5.56B	5.43B	4.76B	4.82B	5.26B
Balance Sheet
Total Assets	28.75B	30.23B	29.78B	27.16B	27.24B	24.28B
Cash, Cash Equivalents and Short-Term Investments	5.94B	7.89B	7.84B	6.10B	5.80B	5.99B
Total Debt	6.64B	6.06B	4.08B	4.63B	4.67B	4.71B
Total Liabilities	16.98B	16.13B	13.26B	13.11B	12.44B	11.02B
Stockholders Equity	11.77B	14.11B	16.52B	14.05B	14.80B	13.26B
Cash Flow
Free Cash Flow	9.60B	7.82B	6.94B	7.40B	6.89B	5.31B
Operating Cash Flow	9.79B	8.06B	7.30B	7.84B	7.22B	5.73B
Investing Cash Flow	-1.02B	149.00M	776.00M	-570.00M	-3.54B	-414.00M
Financing Cash Flow	-11.01B	-7.72B	-5.18B	-6.83B	-4.30B	-3.49B

Adobe Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 349.36
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ADBE, the sentiment is Negative. The current price of 349.36 is below the 20-day moving average (MA) of 353.87, below the 50-day MA of 357.77, and below the 200-day MA of 405.17, indicating a bearish trend. The MACD of -2.01 indicates Negative momentum. The RSI at 46.06 is Neutral, neither overbought nor oversold. The STOCH value of 57.23 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ADBE.

Adobe Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSFT	83 Outperform	$3.72T	36.68	33.28%	0.65%	14.93%	15.50%
ADBE	78 Outperform	$148.70B	22.42	52.87%	―	10.69%	35.23%
ORCL	71 Outperform	$922.22B	76.01	71.15%	0.62%	9.67%	11.23%
PLTR	71 Outperform	$389.92B	546.23	15.30%	―	38.79%	78.37%
SNPS	68 Neutral	$81.38B	34.30	6.61%	―	3.21%	31.64%
ZS	67 Neutral	$44.63B	―	-2.70%	―	23.31%	31.04%
Sector *	61 Neutral	$36.69B	12.42	-10.20%	1.85%	8.50%	-7.32%