Adobe logo and signage on brick facade of office building, San Francisco, California, September 18, 2025. (Photo by Smith Collection/Gado/Getty Images)
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Adobe (ADBE) stock could be a worthwhile investment at this moment. Why? Because it offers high margins – indicative of its pricing power and ability to generate cash – at a discounted price. Such companies tend to produce consistent, predictable profits and cash flows, which mitigates risk and facilitates capital reinvestment. The market typically rewards this behavior.
What Is Happening With ADBE
ADBE may have decreased by -26% thus far this year, but the positive aspect is that it is currently 41% cheaper based on its P/S (Price-to-Sales) ratio compared to the same time last year.
Although the stock may not yet demonstrate this, several factors are positively impacting the company: Adobe’s recent price adjustments for Creative Cloud, which include a 17-18% increase for its Pro tier in North America, are contributing to higher recurring revenue. This growth is supported by strong demand for AI-powered innovations such as Firefly, which has generated over 24 billion assets. Digital Media Annualized Recurring Revenue has surpassed $18.59 billion, indicating robust customer adoption of new features. Remaining Performance Obligations of $20.44 billion further highlight significant future cash generation. Recently, Adobe raised its FY25 revenue forecast, indicating confidence in continuing subscription growth driven by AI integration.
ADBE Has Strong Fundamentals
- Recent Profitability: Approximately 42.2% operating cash flow margin and 36.2% operating margin for the last twelve months (LTM).
- Long-Term Profitability: About 39.0% operating cash flow margin and 35.4% operating margin over the past three years’ average.
- Revenue Growth: Adobe experienced 10.7% growth LTM and 10.5% over the last three years’ average, but this isn’t simply a growth narrative.
- Available At Discount: With a P/S multiple of 6.0, ADBE stock is currently available at a 41% discount compared to one year ago.
Below is a quick comparison of ADBE’s fundamentals with S&P medians.
*LTM: Last Twelve Months
But What Is The Risk Involved?
While ADBE stock may represent a compelling investment opportunity, it’s beneficial to understand a stock’s history of drawdown. ADBE experienced declines of about 72% during the Dot-Com crash, 67% in the Global Financial Crisis, and 60% during the inflation shock in 2022. Even the less severe downturns in 2018 and the Covid selloff came close to 25%. This indicates that despite a company appearing strong, it can still suffer significant losses in challenging markets. However, the risk is not exclusive to major market crashes. Stocks can decline even when markets are performing well – consider events such as earnings announcements, business updates, and changes in outlook. Read ADBE Dip Buyer Analyses to explore how the stock has bounced back from sharp declines in the past.
If you seek more information, read Buy or Sell ADBE Stock.
Stocks Like ADBE
Not ready to take action on ADBE? Consider these alternatives:
We selected these stocks based on the following criteria:
- Market cap greater than $10 billion
- High CFO (Cash Flow from Operations) margins or operating margins
- Significantly decreased in valuation over the last year
A portfolio consisting of stocks meeting the criteria above has performed as follows since 12/31/2016:
- Average 12-month forward returns of nearly 19%
- 12-month win rate (percentage of picks returning positive) of approximately 72%
Portfolios Over Individual Stock Picks
Individual stocks can rise or drop dramatically, but one pivotal aspect remains: staying invested. The right portfolio can help you maintain your investment, capture upside potential, and reduce the drawbacks associated with any particular stock.
The Trefis High Quality (HQ) Portfolio, which comprises 30 stocks, has a history of comfortably outperforming its benchmark that includes all three – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a collective, HQ Portfolio stocks have delivered superior returns with reduced risk when compared to the benchmark index; a smoother investment experience, as demonstrated in HQ Portfolio performance metrics.
