r/valueinvesting
I think AI is a tailwind to Adobe. Cash cow + a startup style optionality build in.
Adobe's AI freemium growth drives expansion, offering cash cow value and startup optionality at depressed valuations with buybacks.
- AI is a tailwind; freemium strategy is successfully driving MAU and AI revenue growth, transitioning the company back to a rapid expansion phase.
- Adobe's complex, multi-layered, and collaborative media workflows cannot be easily replaced by simple LLMs, securing its software UI necessity.
- Depressed valuations offer a cash cow and startup optionality combo, further enhanced by management's aggressive share buybacks.
I think AI is a tailwind to Adobe. The slightly lower organic growth is because company reduced the paywalls for their products and made it smoother for new users(Freemium ) to experience adobe and its features. Gets the users hooked to new AI workflow first, later they can slowly monetize them.
I argue Adobe is going back to a "rapid expansion phase" of business cycle from its present "Mature business phase". If you look at the number of new users growth(MAU) and AI revenue growth, we can see rapid expansion in the past few quarters. It is like a total new startup branch rapidly growing. I think what management is trying to do makes sense. They can either keep status quo and keep charging high SAAS like revenues and slowly get disrupted by someone like Canva or become the disruptor themselves and grab the new market.
Also future of media production will be more and more with the support of AI, so a regular media campaign budget will shift a bit from physical to digital AI spends. Working with Adobe is not single media generation like present day LLM's, it is a multi layered complex media , that is super HD quality with tons of data and layers , multi artists collaborative, team work that needs multiple iterations and the output often has to fit many types of media. I just cant imagine how LLMs and data centers can process all this data. It eventually again has to be some kind of software with user interface may be with some kind of generative AI attached to it.
Wall street seems to not understand how creative arts work and how the Industry Pros works.
At these depressed valuations we are basically getting a cash cow + a startup style optionality in built. Also management is rapidly buying back shares, so for someone who is already holding Adobe shares, management doing the average downing part on their behalf. lol End of the day any investment has to be seen from a larger portfolio and risks perspective. I don't see why Adobe cant be a decent position for any long-term investor portfolio at these valuations.
Adobe will do well with its current customers. And may even expand with them.
But it is much easier for smaller customers to justify freemium. For someone with a brand, cutting costs down to the lowest level does nothing but dilute the brand.
Homie…I also have an MBA. Your credentials don’t matter if all you do is spout gibberish.
Or promise to send Photoshop to Mars.
I still wouldnt put money into it
I can see your perspective. Cant dispute that. Ai possibilities are endless , we never know how can things actually pan out with AI.
I do agree but i dont want to be 50% down on adobe because their earnings gave an bad future outlook because of something completly unrelated to ai.
haha.. yeah I feel what you are saying, but 50% down from this price point kind of looks like a low probable event. Cause that would put Adobe at a valuation of a Coal company in a downcycle lol
But yeah, never say never with Mr market. lol
Reminds me this popular quote "In the short term the stock market behaves like a voting machine, but in the long term it acts as a weighing machine.
Same posts for the last year. Stock price- down..
Keep buying though. Maybe if youre lucky youll break even one day
I don't believe in Luck though. I see only probabilities, risk adjusted returns and how a stock fits in my larger portfolio.
At this point I see the risks and rewards in my favor, that is all it is.
Well as mentioned. People been saying this since 350. Not a jab at you though. Maybe 200 is the bottom
Yes, sure people have been saying the bull thesis for a while. That is big part of the Value investing game, we often find asset mispricing only when there is uncertainty and some kind of downward trend.
I am okay if it goes down further, my Company will do the share buyback instead of me. lol If the thesis is correct, the rewards I see are substantial in the long run.
If 200 is bottom great, if it is not that is great too lol
Man they aren't on the upside of the market right now. The AI boom is working against them. That is not good.
Unlike NOW or WDAY, where AI boosts it, AI is there to eat Adobe’s lunch and any other SaaS that provides point in time capability. Adobe will maintain its niche at the pointy end but that won’t prevent it from shrinking.
It’s a stat dying and turning into a neutron star.
That’s fair - idiots was harsh. I think it’s idiotic to keep trying to rationalize why a nose-diving stock should be bought, but I shouldn’t have aimed that at the members of this sub.
Investors and traders may be different, but they don’t need to be mutually exclusive. I’m both - I have long term holdings I buy on fundamentals, but I always check the chart to see if the market agrees that there’s opportunity. You can rationalize all you want, but if the chart is going down, the market disagrees with you, is seeing something you don’t see, and you lose money.
People in this sub think traders are degenerate gamblers. The good ones just know that if you want to make money, you need to both buy companies \and\ the chart needs to go up.
Agree with most of the points you put out there. I was a trader back then now mostly an Investor, I evolved my own philosophy overtime. Had to let go of momentum trading as it was not working for me, going against the crowd on selective companies has been working for me for the past 8 years.
So i am continuing what is working for me. Every single investment that worked out for me so far it goes something like this,
Rapid fall in share price in a very short period -->
Maximum pessimism and uncertainty on some asset (high quality one, highly scalable, good margins) --->
I buy at decent valuations making it 13 or 15 % of my portfolio --->
Asset drops more, I have to see the stock in red at 20 or 30 percentage down for an year or so----- >
then out of blue some narrative changes and rapid acceleration in share price like literally it hits multi decade or multiyear charts, all time high in few months---->
Then i cash out and go to the next hated game in town.
it happened with Alibaba, Tencent ,Alphabet, Amazon, Samsung and many more regional Asian names you may not know.
I see Adobe in similar situation. Nothing idiotic here. every person is different, have different personalities, ways of analysis, risk profiles, family situation, education , circle of competence , portfolio level philosophy, experiences, patience levels yada yada.
All these combined forms a single decision on a stock. Never underestimate a person who is genuinely giving a rational chain of thought and a thesis which is based on serious thinking. you may not see the point of view but we should never call their views idiotic.
I studied Psychology at masters level lol So i kind of understand how cognitive biases, experiences shape a person's ability to perceive or make a decision. I specifically studied Social Psychology, Crowd behavior and things like than I apply straight to the markets. And I am making money this way.
So all good, people who agree they follow, who disagree they don't. It barely changes my decisions. lol