Reasons To invest in ADOBE

2022-01-31T11:39:12
Adobe invest stock
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Reasons To invest in ADOBE

 

Reasons To invest in ADOBE: When it comes to companies with a long and solid history that are also at the forefront of going digital, few companies have more to offer to investors than Adobe. 

As a market leader in its field, Adobe is a bit under the watchful eye of investors but it is a part of many people’s daily lives.

Evest Follows adobe development in the following report

 

Strong and stable financial performance

Adobe areas for strategic growth

 A place for growth

Adobe improves its products for consumers

Operating efficiencies and share buybacks

Adobe stock continues to rise

Adobe is a leader in its field

 

 

Strong and stable financial performance

Adobe announced its fourth-quarter and fiscal year earnings in December.

For 2021, revenue and operating income increased  23% and 37% year-over-year, respectively.

While net income decreased by 8%, this was primarily due to the one-time benefit ,
of income taxes that positively impacted the 2020 fiscal year,

Causing an unfavorable comparison on an annual basis.

Adobe areas for strategic growth

 Adobe has  regions of strategic growth, virtual media and virtual reviews.

The virtual media department includes innovative merchandise that many customers engage with,
together with Photoshop, Illustrator and PDF documents.

Digital reviews cognizance on data-pushed gear for businesses.

Of the , virtual media made up 73% of general sales in 2021, up from 69% in 2019.

Regardless of the sector, Adobe makes its cash from subscriptions,
which made up 92% of general sales in 2021, up from 86% in 2019.

Recurring subscription sales is important, in view that its rate fee could be very low.

This percent growth in gross sales helped enhance gross margin from 85% in 2019 to 88% in 2021.

 

 A place for growth

The previous success of the business should give investors confidence that as opportunities persist,
Adobe should be able to deliver.

To this end, management believes that there is plenty of room for growth.

The company believes that the total addressable market (TAM) for Creative Cloud Photoshop, Illustrator, and other products is $63 billion.

For reference, Creative’s revenue for 2021 $9.6 billion.

Similarly, the administration claims that the TAM for its Document Cloud products (electronic signatures and more) is $32 billion.

In 2021, Adobe generated $2 billion in revenue from Document Cloud.

Adobe improves its products for consumers

Even if those forecasts turn out to be overly optimistic,
It’s still reasonable to assume there is plenty of green space for Adobe to continue to gain,
market share and improve its products for consumers. 

Adobe in particular is looking to expand its creative offerings so that they can be accessed anywhere.

For example, the company is working on a trial version of Photoshop that runs in a web browser.

Adobe also made a significant acquisition in this area when it agreed to ,
buy cloud-based video collaboration company Frame.io in October 2021.

 

Operating efficiencies and share buybacks

Further help in the financial performance of the business is the improvement of business efficiencies.

Operating expenses as a percentage of total revenue have declined in each of the past two years,
declining from 56% in 2019 to 51% in 2021.

And as revenue grows, Adobe is demonstrating its ability to maintain cost parity, and take advantage of the – scale of increase.

Perhaps the most impressive is Adobe’s share buyback program.

During this time of continued revenue growth and price increases,
the company has repurchased nearly $12 billion of its stock since 2018.

At the end of 2021, the company still has $13.1 billion of remaining power in its stock buyback plan. 

Adobe stock continues to rise

Except for the drop in October, Adobe’s stock price has risen consistently in 2021.

However, shares are down 27% from their highs and are trading for 36 times forward earnings and 13 times forward sales.

While these two multipliers aren’t cheap, they are their lowest levels since April 2021.

Adobe is a leader in its field

It has decades of proven success, plenty of market share available to acquire,
and an adequate shareholder capital allocation plan.

The fact that the shares are trading for a discount is icing on the cake for anyone considering buying Adobe stock in 2022.

 

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