ADBE Stock: Game-Changing Technology Could Make Investors a Fortune
Adobe Stock Gains on AI backed Creative Cloud
Today’s stock relates to my favorite strategy of investing in stocks that stand to gain immensely from the rise of the digital economy. These are the stocks that are on a secular growth path as more consumers hop on to the digital bandwagon and become part of the connected and shared economy.
By building positions in such growth stocks, investors improve their odds of achieving triple-digit returns.
Our focus today is Adobe Systems Inc (NASDAQ:ADBE), which is one of the largest and most diversified software companies in the world.
Adobe has developed “Adobe Sensei”—its artificial intelligence (AI)-based platform—to further add value to its huge line of products and services. These solutions are used by creative professionals, marketers, application developers, enterprises, and others to deliver content and experiences across multiple devices and media.
And the best part is that its growth is least likely to be disrupted by the political uncertainties prevailing in the world. As the technology advances and more consumers turn to mobile and visual content, Adobe stock is bound to go higher.
The company has been reinventing itself constantly, and the phenomenal rise in ADBE stock is evidence of that. Adobe’s strategic growth areas are Digital Media and Digital Marketing. The digital media offerings comprise of “Adobe Creative Cloud” and “Adobe Document Cloud.” These are the areas with tremendous growth potential in the coming years.
The star performer of the company’s Digital Media business is Adobe Creative Cloud, which is a subscription service that allows members to use Adobe’s creative products integrated with cloud-delivered services across desktops, web, and mobile devices. They can access the latest versions of “Adobe Photoshop,” “Adobe Illustrator,” and many more creative applications.
As the shift to digital content accelerates, Adobe will likely continue to gain from being the leading solutions provider in this space. In a presentation made to analysts this month, the company estimates that the total addressable market for Creative Cloud should reach approximately $24.2 billion in 2020. (Source: “Investor Handout,” Adobe Systems Inc, October 24, 2017.)
A core part of Creative Cloud is Adobe Sensei, its platform to leverage machine learning, artificial intelligence and deep learning capabilities to tackle today’s complex creative experience challenges. This is what sets the company apart from the rest. Early this month, ADBE stock hit a new high as the company announced new AI and Cloud products at its creativity conference.
All these updates include capabilities powered by Adobe Sensei. They are the latest in a series of innovations from Adobe that serve modern creative professionals and enthusiasts wherever they work. Adobe is building out a range of fast, flexible solutions for creative projects of all types, and its Sensei AI platform capabilities will serve as a key differentiator.
Besides announcing new products, Adobe also delivered full-year 2018 financial guidance that blew past consensus estimates, sending the Adobe stock price flying through the roof.
Adobe is a market leader in the digital media space, where it currently faces strong tailwinds of content explosion and mobility growth.
Last month, the company had posted record revenue for the third quarter, with quarterly revenue increasing by 26% year-over-year to $1.84 billion. Its cloud-based subscription offerings attracted a phenomenal response.
The optimism surrounding the business has resulted in Adobe stock gaining more than 400% in the last five years and about 64% in the last year. The following chart shows this astounding rise.
Chart courtesy of StockCharts.com
Given the leading position of the company in different business segments, and digital media providing a significant market opportunity for Adobe, ADBE stock should continue scaling new heights.
Analyst Take:
With the aim of changing the world through digital experiences and empowering people to create, the company stands to be a winner in the changing world of content creation. Creative Cloud can continue to generate high growth. With customers resorting to digital devices more than ever, the trend bodes well for ADBE stock.
Adobe is building on its AI features, and its new cloud subscription offerings are likely to bring in more cash. As demand for visual content creation keeps growing, the Creative Cloud should expand further. Adobe is changing the world through digital experiences, and Adobe stock should be considered on every sign of weakness.
