r/valueinvesting
ADBE with math
Author models ADBE buybacks driving EPS to $42-$47 by 2030, implying a $420-$700 fair value, questioning its current severe undervaluation.
- Massive $25B buyback program through 2030 will significantly reduce share count by 21-30%.
- Projected net income growth to $13B by 2030 combined with share reduction could drive EPS to $42-$47.
- Current price (~$201) implies a massive discount to the calculated fair value of $420-$700 based on 10-15x PE.
- The author's assumptions (8% net income growth, 10-15x PE multiple) may be overly optimistic or ignore macro risks.
- The author explicitly states confusion ('What am I missing here?'), implying there might be fundamental flaws or hidden risks not accounted for in the math.
\~400 million shares outstanding. $25b buyback program through 2030.
Scenario A: With the (current 201) premarket price: $25b / $201 - 119 million shares. 30% of the float.
but assuming 201 is silly.
Scenario B: Assume average cost for buybacks rises to $300.
$25b / $300 = \~83 million shares. 21% of the float.
Assume current net income $9.7b grows 8% per year (they reported 13% yesterday during earnings). That's $13b by 2030.
In Scenario A, $13b / \~280 million shares (remaining) = $47 EPS.
In Scenario B, $13b / \~315 million shares (remaining) = $42 EPS
10 PE in Scenario A is $470 per share. 15 PE is $700.
10 PE in Scenario B is $420 per share. 15 PE is $630.
IDKWTF is going on. What am I missing here?
Buyers aren't showing up. They're over at SPCX, competing for the last tulip.
The day that the market cares what your P/E is, you're done as a growth stock.
I came all in at 199.6 lol
Your missing nothing, the fear is in 5 years revenue has declined and only earnings growth comes artificially from buy backs.
Revenue has not been declining , where did you get this from ?
ADBE is currently around an 8 P/E using the company’s estimate for FY2026 EPS. If you think the company will double their P/E with 8% annual Net Income growth and share decline the math says it’s a buy. Normally the hardest assumption to hit is for the P/E to expand because the company has no control over this, the shares can decline and EPS can rise, but if buyers don’t come in P/E will continue to contract.
Adobe is not PE 8. You have to look at GAAP earnings (which includes the cost for share based compensation) for which guidance is 17,9-18,0 for 2026. So PE 11,4, cheap nonetheless but not close to 8
Adobe's client is professionals working on complex projects, not amateurs creating single images using AI without editing. If you go to the forum for the actual professionals, you will find people have seriously compared Adobe core products (such Photoshop) with major competitors (such as canva affinity photo) and concluded that it is very hard to switch due to nuanced missing features that's preventing them from completing the tasks. Then you add in all other Adobe software offered in the bundle, with workflow around all of them, it makes it very hard if not impossible to switch to a new provider that can provide all the required products/features.
Flabbergasted by the level of ignorance…
The current negative sentiment stems from not understanding what Adobe offers, what it represents, and who uses it.
People seem to think this is some AI vs. Photoshoppin’ moment. AI vs. PDFs
AI vs “bro I need a logo”
Has anyone considered the worldwide 750bn+ publishing (print/digital) industry that heavily relies on 100+ distinct job titles utilizing standards like Adobe Indesign, Incopy, Acrobat, Cloud Servers, FrameMaker, Bridge, Illustrator etc.?
That’s just one facet. Apply this to every other face of the creative industry from film to video games, advertising, broadcast design, fashion, consumer packed goods, etc. the list goes on…
Their ecosystem is the universal connective tissue of an interoperable, and interdependent creative pipeline…from pre-production to marketing relying on over 40 apps…
The marvellous technology of generating an image with a prompt ( + 1000 follow-up prompts, paid tokens, to try and get it just right ) is not a threat to Adobe.
Do people hate the subscription model? Of course. Are there free options outthere? Yes, for Photoshop only. For years already, of subpar quality and lacking intercompatibility with the rest of the industry.
LLMs will indeed replace the mediocre alternatives used by hobby creatives and make them obsolete ( the hobbyists, and the ‘free’ software )
Adobe isn’t going anywhere. The better AI gets (not LLMs that are by default flawed in the creation of novelty), the more effortless it will integrate their ecosystem.
Adobe Firefly might aswell disappear if the way AI instantiates in their suite continues to be more and more imperceptible, as it should: I invite everyone to watch their latest AdobeMAX keynote. They are not an AI company, and similar to Apple, they will pick the best AI partner implement new tools in their ecosystem.
I only invest in industries I understand, and this is an asymmetrical setup like no other.
You get way more in return capabilities for more token consumption. It’s not like consumption goes up and you get the same results.
Adobe's client is professionals working on complex projects, not amateurs creating single images using AI without editing. If you go to the forum for the actual professionals, you will find people have seriously compared Adobe core products (such Photoshop) with major competitors (such as canva affinity photo) and concluded that it is very hard to switch due to nuanced missing features that's preventing them from completing the tasks. Then you add in all other Adobe software offered in the bundle, with workflow around all of them, it makes it very hard if not impossible to switch to a new provider that can provide all the required products/features.
MU has a FWD P/E of 9, ADBE has a FWD P/E of 7.5
Earnings could drop in future rather than grow as creative tools are perceived to be disrupted due to AI
Adobe's revenue is increasing and the content creation industry is exploding. Point me to something that is declining now as a proof other than just the feelings. Momentum means nothing over the long term.
Market thinks NI doesnt grow 8%
There should be like an ETF for ADBE, PYPL, NVO, INTU, etc.
I might put a small Amount in as a soft hedge against my AI holdings
I’m designer by trade, and anyone who thinks gen image AI is not a direct to threat to Adobe’s product line is delusional and shows you just look at the financial statements and have never worked in Adobe’s tool.
The things AI can produce with the latest models are no longer slop. If you think, it’s because you not up to date with latest models. It is very strong in editing/creating videos/images.
What if AI companies decide to rise the price of tokens, and you can't afford to have a model locally?
Token prices have only gone rapidly down and will continue to go further down as they scale. Token consumption has gone up.
What‘s your take on the future of Adobe?
A business can be doing well and its stock price can be doing terribly simultaneously. This can last way longer than you think. It doesn't pay a dividend which begs the question what are you paying for? PE metric alone?
Thanks for showing up
"Never buy value in tech" bulshit. bought Meta at 9PE and made 7x
Bought Google at a low pe as well and made 2x.
Same
If you’ve used it recently there’s a search box that automatically gives you each tool. Pretty simple for new users now! Ai powered
The market doesn’t believe we’ll see 8% growth per year for the next 4 years. History shows many companies grew revenue for years before entering permanent decline, and the stock price anticipates the decline before it happens. BlackBerry continued growing revenue all the way to 2011 but the stock price peaked in 2007 and the market anticipated the decline correctly.
With competition from lower priced tools and the threat of AI, many believe Adobe will peak soon. When it does, being priced at single digit P/E will be what everyone expects.
I think you focused only on net income having positive income growth.
Maybe scenarios for negative / flat / positive net income growth might be more instructive. There are many knobs and you can pick which financial ratio you want to model this on - pick something that does not agree with what you want to happen
What a lot of folks in this sub don’t realize is math > vibes. Vibes win in the short term - math always wins long term. Could bears be right? Sure - but there is literally nothing in the numbers that supports their narrative.
You are correct , but Adobe doesn’t care about those customers because they don’t have a lot of money.
But in Adobe’s summit , they showcased generating images with AI with scale and distributing it across every marketing channel with the Adobe product. Also they implemented corporate governance to that distribution