For much of the past two years, investors have been focused on the technology sector, with particular interest in new trends and themes happening in the world of artificial intelligence, as well as developments on the next computing power horizon. As part of this trend, some popular stocks have performed very well over the past 12 months. However, not everyone rose with this tidal wave.
In other words, there are stocks that deserve the same merits as companies like NVIDIA Company NASDAQ: NVDA and even Palantir Technologies Inc. NASDAQ: PLTRbut did not achieve the same valuation in broader markets over the same period.
Adobe today
(As of 5:45 p.m. ET)
- 52 week range
- $432.47
▼
$638.25
- P/E ratio
- 36.30
- Target price
- $584.88
That’s why it makes sense to pay attention to stocks Adobe Inc. NASDAQ: ADBE today, especially since they are trading near their 52-week low.
The price level may concern some investors, who would be correct in thinking that the stock might be cheap for a reason. This time, however, there are many factors at work under the hood of Adobe’s business model that will make it a potential buy and prove those bears wrong. These reasons will become clear in a minute, and at the end of this analysis, investors will be educated enough to consider adding Adobe stock for themselves.
Monopolized supply in a modern economy
The global economy is becoming more digitized every day. As more jobs today go online and companies decide to move their operations into social media and the digital realm, Adobe’s suite of software offerings will come into play for the economy of the next decade.
Whenever investors see a new social media ad, YouTube video, or flyer for any brand online, chances are the employees behind that creation used some kind of Adobe product to create it. Knowing that this offering was a monopoly due to name recognition and market penetration, Adobe management decided to change the situation.
How? Adobe has now embraced the subscription model, and the latest quarterly financial reports show that more than 90% of the company’s revenue comes from subscription payments. Although some have criticized this aspect of the brand, it is no different from Microsoft Inc. NASDAQ: MSFT and a subscription model for Office products.
Knowing this, investors can assume that Wall Street analysts will have an easier time forecasting Adobe’s financial performance going forward since most of its revenue is somewhat guaranteed through its subscription model. Management can also effectively manage the company’s capital and achieve higher returns on capital to encourage higher prices.
Wall Street Now Loves Adobe Stock
Overall, Wall Street analysts couldn’t help but maintain their bullish view on Adobe stock, especially since it’s currently trading at 68% of its 52-week high. Barclays decided to reaffirm Adobe’s December 2024 rating, this time valuing the stock at $645.
To prove the accuracy of these recent estimates, Adobe stock would need to rise as much as 44% from where it trades today, giving investors one of the best risk-reward ratios in the tech sector today. However, these estimates will need to have some financial backing if markets are to react to them and buy shares.
Adobe MarketRank™ Stock Analysis
- Overall MarketRank™
- 98th percentile
- Analyst rating
- Moderate purchase
- Pros/Cons
- Growth potential 29.9%
- Short interest level
- Healthy
- Dividend Power
- N/A
- Environmental assessment
- -0.55
- Mood News
- 0.42
- Insider trading
- Sale of shares
- Project Profit Growth
- 12.67%
See full analysis
One such source of support is a company’s return on invested capital (ROIC), which is one of the main drivers of stocks that increase investor wealth. For Adobe, the ability to safely forecast and manage all incoming revenue allows management to achieve ROIC of up to 31.6% over the last 12 months.
These analysts weren’t the only ones eager to make their bullish forecasts public. Adobe executives decided to buy up to $2.5 billion worth of shares during the past quarter, sending a signal to the entire market that the stock could be cheap today, and who better to know than the insiders themselves?
Moreover, representatives of Geode Capital Management decided to increase their holdings in Adobe shares by as much as 1.4% as of November 2024. That year-end shopping spree brought their net position to a high today of $5.4 billion, or 2.4. % ownership in the company.
Finally, even bears know that Adobe stock should be higher than today’s levels, which is why investors could see the company’s short stock decline by 10.9% in just the past month. This is a clear sign of bearish capitulation to these events for the future of Adobe.
Before you consider Adobe, you should hear this.
MarketBeat tracks Wall Street’s top-rated and best-performing analysts daily and the stocks they recommend to their clients. MarketBeat identified five stocks that top analysts were quietly telling their clients to buy now, before the broader market caught on… and Adobe wasn’t on the list.
While Adobe currently has a Moderate Buy rating among analysts, the top-rated analysts consider these five stocks to be Strong Buys.
View five stocks here
Just going into the stock market? These 10 common stocks can help new investors build long-term wealth without knowing options, technical or other advanced strategies.
Get this free report