Adobe Stock Is Worth a Look as Creative Cloud Pushes the Envelope

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The tech boom has carried a number of famous brands to all-time highs in the past year, but surprisingly little attention is paid to Adobe (NASDAQ:ADBE) stock. That’s unfortunate as Adobe shares have had a strong run and, barring an exogenous disaster, I see no reason for the momentum to let up.

Adobe Stock Is Worth a Look as Creative Cloud Pushes the Envelope

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The company has come a very long way since graphic-editing program Photoshop debuted 30 years ago. It’s quite a different program today, of course, but the headline story is that it’s part of Adobe’s flagship cloud-based software-and-app suite known as Creative Cloud. With this, ADBE stockholders should remain confident that the company’s pivot to a cloud-based model will provide outstanding value for years to come.

Adobe Has a “Cool” Quarter

Before circling back to the cloud, it’s worth revisiting the amazing quarter that gave ADBE stock its mojo in the first place. On Dec.12, Adobe reported its earnings results for 2019’s fiscal fourth quarter, and the investing community was understandably impressed. Revenue gains of 21.4% prompted a rather colorful note from Canaccord Genuity analysts, saying, “This rate of growth has taken on a near mythical importance, at least in Silicon Valley as 20% historically has been the demarcation between the cool kids and the clod kickers who reside in flyover states.”

If outstanding revenue growth is what it takes for Adobe to join the “cool kids,” then I’ll take Adobe over an underperforming “clod kicker” any day of the week. In any case, Adobe’s quarterly adjusted earnings of $2.29 per share beat the consensus estimate of $2.26, while $2.99 billion in sales outpaced the $2.46 billion generated in the equivalent time span a year prior.

Rather than obsess over the 20% revenue growth, I prefer to give credit where it’s due and Adobe certainly deserves credit for a spectacular quarter. Skeptics might insist that the stock is richly priced, but as long as the revenues are strong and growing, I feel that the share price is justified and poised for steady growth in the coming months.

Getting Creative in the Cloud

Photoshop was bold and cutting-edge 30 years ago, but a niche leader like Adobe isn’t known to rest on its laurels. Today, the company is embarking on the next stage of a natural and necessary evolution as Adobe shifts towards a subscription-based, cloud-centered business model.

While it’s fine to act nostalgic about Adobe’s roots in Photoshop, investors must now look toward the future. And that future lies in Creative Cloud.

This collection of programs and apps includes a vastly improved Photoshop, sure, but there’s more to it than that. Available for both desktop computers and mobile devices, Creative Cloud comprises over 20 apps including:

  • Digital and print publisher InDesign
  • Video editor Premiere Pro
  • Vector-art program Illustrator
  • PDF platform Acrobat DC
  • Adobe Portfolio for building web-based portfolios
  • Thousands of fonts via Adobe Fonts

Perhaps most important, it features 100 gigabytes of cloud storage, indicating that Creative Cloud deserves its name. As to the level of user satisfaction with the app suite, UBS surveyed 316 Creative Cloud buyers and analyst Jennifer Swanson Lowe’s summary of the findings was encouraging:

“The data shows both growing adoption and increasing ARPU (average revenue per user) within the Creative Cloud base … We see this sustaining high-teens revenue growth and EPS growth greater than 20%.”

The Final Word on ADBE Stock

And so, we’re back with that 20% figure again, but that’s not a bad thing as this level of projected earnings growth bodes well for Adobe. Therefore, I’m more than happy to shun the “clod kickers” and hang out with the “cool kids” as Adobe stock has fully earned my ‘A’ rating.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


Article printed from InvestorPlace Media, https://investorplace.com/2020/02/adobe-adbe-stock-creative-cloud-pushes-envelope/.

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