r/valueinvesting
ADBE and value investing
Author argues ADBE's AI-related discount is overblown, comparing it to Buffett's Washington Post bet, and sees limited downside.
- Downside is limited and AI disruption fears are overblown, offering a significant discount.
- Core user base of professional artists won't switch to AI, and AI integration can lower barriers for new users.
- Market overreaction to tech disruption presents a classic value investing opportunity.
Disclaimer: I'm a dumbass.
I think most of the people worried about AI disruption are missing the point of value investing. Washington post was Buffets most famous case study because as the market were worried about digitalisation he believed that this disruption is not going to kill the stock. The market would never hand you a stock with an insane discount without ANY solid valid bear case. My bullish bet on adbe is that the downside is limited AND AI disruption fear is blown out of proportion.
Artists would rather go homeless than use AI, the casual user and the barrier of entry of art was never ADBE user base. Noone learnt Photoshop for a one time picture of trump riding a dolphin, if anything AI would help ADBE lower the barrier of entry for those interested in becoming artists.
Could I be wrong? Absolutely. But let's stop pretending that the bullish case doesn't factor in AI disruption. In fact, I'm grateful for it for such a great discount.
Positions: 217 shares @202
Overcrowded streaming offerings which is still the case. But most companies were giving away 6 months free trials and subscriptions for peanuts to fight for market share.
You also forgot INTU
I’ve worked on commercials and films for the last 15yrs using Adobe products.. Ai is killing Adobe’s customer base. No one needs to learn or pay for photoshop when ChatGPT can make any of the little photo adjustments you need for free. Also I don’t understand how people think Ai is good for Adobe when Ai is creating huge unemployment for the creative professionals that would use their Adobe products. I always find it interesting that people in the industry never invest in Adobe and people who aren’t do
Naw just don’t like stupid people who spew out bullshit but whatever helps you sleep.
And they don’t just recover right away. This idea that “I bought it, and it still went down” is very primitive low minded thinking.
Well it's 66% undervalued
and the Target is 37%
the Target was like 2.5x before xmas so it'll take a while to record back to when
I bought it for under $500
Currently $204
Lowest of the 30 Analysts 12-month Target $190
Highest of the 30 Analysts 12-month Target $460
Average Target $281
Fair Value $636
Dec 2026 Theoretical Fair Value $652
only problem right now is Valuation and Momentum
Revenues are good
and it passes 2 of the Peter Lynch Tests
don't see any serious issues with the company really
Low Risk and Good Future Performance
(not Excellent Future Performance)
might buy some in the future while it's cheap but not for some weeks or months with the terrible momentum, it'll take a while
I think the moat is great, but I really don't give a shit about moats, looking a year ahead for their profits and growth without any warning bells is good enough
if nothing changes it'll take 2 years to get back to where it was
if things get to be as good as it was 2-3 years ago, a year and some
Targets usually reflect the economic climate and the momentum of the stock, so I tend to value those more
Jan 2025 is when this went stupid, and Jan to June 2025 it's still on track
Thinks were not a problem in September 2024, when things were 10% to 20% overvalued
I'd say I got 80% confidence in the stock
and growth
zero to worry about now
in three years time, sure I'd worry
would I buy this week?
80% No
20% Yes
you got like 2-3 months to buy much better stocks
why let it snore for 4-5 months?
Companies get killed because they either ignore, or resist the transition.
The major vacuum cleaner companies could have licensed James Dyson's patent but they liked the sales of bags. So didn't bother. The sensible thing was "that's the bag business gone, but we'd better license this or someone is going to kill us".
It's why Tesla is a long-term disaster. The likes of VW, Mercedes, BMW and Kia reacted. People who trust those brands want to buy from the same brand, if they can.
The future isn't "AI companies". It's tools with AI extensions. Like Github Copilot integrates with Visual Studio. Do some AI, do some manual adjustments. Most software makers have adapted.
"AI companies" are going to be making money selling models, but that's just going to be fiercely competitive like server hosting.
5 seconds after OpenAI and Anthropic float, the hype machine will turn off. The people owning shares in them will have dumped their bags and not be appearing on YouTube videos.
To be honest, I really bought Adobe too early. I'm down quite a lot but not that worried. The sooner the IPOs come, the better.
Would you still use Adobe if you dont have to pay for it? (say your company pays for it, and it's not out of your own pocket)
regarding your comment on "reduction of subscription by 1/3" - are those replaced by other software vendors?
With Affinity. Those workplaces mostly just used Photoshop to resize and crop images. Photoshop is a little overkill for that.
Okay got it, yeah then they don't really need Photoshop.
The real question is who will be the Xerox or Kodak of our times.
Adobe, imho, has an excellent chance being the Kodak moment
Then they put ads on the lower tier and it started to move up
Good history info on Blockbuster. Yeah it's pretty hard for Adobe to go bankrupt with so little debt. They have to really try lol
Which as much pessimism Adobe has right now. I would say sentiment couldnt be worse. And we are close to the bottom. Picked up my long hold position here. My track record of picking bottoms have been stellar. AMD at 56, META at 90, GOOGL at 150, POET at 4, TESLA at 140. Literally every stock ive bought the last 6 years has been on bottoms. Now my problem is that i dont sell. I sit though everything, 200% up, 50% down. But still, lets see if im right this time too. You guys can set reminders if you want to.