Adobe Stock Has 20% Upside Based on Its Free Cash Flow and FCF Margins

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Adobe Inc (ADBE) generated strong free cash flow (FCF) and FCF margins in its latest quarterly report. Even after Friday's huge runup, ADBE stock still has a 22% upside over the next year. Shorting ...

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Shorting ...</p>\n\n<a href=\"https://www.barchart.com/story/news/26852252/adobe-stock-has-20-upside-based-on-its-free-cash-flow-and-fcf-margins\">Source Link</a>\n\n</div>\n","source":"barchart_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Adobe Stock Has 20% Upside Based on Its Free Cash Flow and FCF Margins</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAdobe Stock Has 20% Upside Based on Its Free Cash Flow and FCF Margins\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-17 00:32 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.barchart.com/story/news/26852252/adobe-stock-has-20-upside-based-on-its-free-cash-flow-and-fcf-margins><strong>Barchart</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Adobe Inc (ADBE) generated strong free cash flow (FCF) and FCF margins in its latest quarterly report. Even after Friday's huge runup, ADBE stock still has a 22% upside over the next year. Shorting ...</p>\n\n<a href=\"https://www.barchart.com/story/news/26852252/adobe-stock-has-20-upside-based-on-its-free-cash-flow-and-fcf-margins\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0557290698.USD","symbol_name":"施罗德环球可持续增长基金","start_time":0,"source_url":"https://www.barchart.com/story/news/26852252/adobe-stock-has-20-upside-based-on-its-free-cash-flow-and-fcf-margins","article_id":"2444497416","we_media_id":null,"thumbnails":["https://media.barchart.com/contributors-admin/common-images/images/Stocks%2C%20Markets%2C%20%26%20Global%20Economy/Charts%2C%20tickers%2C%20traders/iStock-884650780.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2444497416","pubTimestamp":1718555556,"sourceInfo":{"source_id":"barchart_highlight","name":"Barchart"},"weMediaInfo":null,"summary":"Adobe Inc  generated strong free cash flow  and FCF margins in its latest quarterly report. Even after Friday's huge runup, ADBE stock still has a 22% upside over the next year. Shorting OTM puts could be a good play here.ADBE rose 14.5% to $525.31 on Friday, June 14, after the company released its fiscal Q2 earnings on June 13. However, ADBE stock could have at least a 22% upside over the next year to $640 per share.Moreover, this represents a significant increase in its FCF margins over the last year. For example, based on Seeking Alpha data, Adobe generated $6.368 billion in trailing 12-month  FCF for the year ending May 31. That represented 31.1% of its TTM revenue of $20.429 billion.In effect, almost all analysts see a higher price for ADBE stock over the next year. AnaChart, a new sell-side analyst tracking service shows that Michael Turrin, of Wells Fargo, has a $700 price target for the stock. He raised that from $690 two","collect":0,"end_time":0,"defaultTopTitle":"barchart.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0557290698.USD":"施罗德环球可持续增长基金","LU1720051108.HKD":"ALLIANZ GLOBAL ARTIFICIAL INTELLIGENCE \"AT\" (HKD) ACC","LU2458330169.SGD":"FRANKLIN SHARIAH TECHNOLOGY \"A\" (SGD) ACC","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU2458330243.SGD":"FRANKLIN SHARIAH TECHNOLOGY \"A-H1\" (SGDHDG) ACC","LU0109391861.USD":"富兰克林美国机遇基金A Acc","LU1267930730.SGD":"富兰克林美国机遇基金AS Acc SGD (CPF)","LU0170899867.USD":"EASTSPRING INVESTMENTS WORLD VALUE EQUITY  \"A\" (USD) ACC","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","BK4581":"高盛持仓","LU2360032135.SGD":"ALLSPRING GLOBAL EQUITY ENHANCED INCOME \"A\" (SGDHDG) INC","LU0082616367.USD":"摩根大通美国科技A（dist）","LU1803068979.SGD":"FTIF - Franklin Technology A (acc) SGD-H1","LU2095319765.USD":"Natixis Thematics Subscription Economy R/A USD","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","LU2125154778.USD":"ALLSPRING GLOBAL EQUITY ENHANCED INCOME \"A\" (USD) INC","LU2210150020.SGD":"Natixis Thematics Subscription Economy R/A SGD","SG9999000418.SGD":"Aberdeen Standard Global Technology SGD","LU0234572021.USD":"高盛美国核心股票组合Acc","LU2210149790.SGD":"Natixis Thematics Subscription Economy R/A SGD-H","LU0109392836.USD":"富兰克林科技股A","BK4528":"SaaS概念","LU2125154935.USD":"ALLSPRING (LUX) WF GLOBAL EQUITY ENHANCED INCOME \"I\" (USD) INC","LU2237438978.USD":"Amundi Funds US Pioneer A2 (C) USD","BK4023":"应用软件","BK4592":"伊斯兰概念","LU0965509010.AUD":"AB LOW VOLATILITY EQUITY PORTFOLIO \"AD\" (AUDHDG) INC","ADBE":"Adobe","FCF":"第一联邦金融","BK4523":"印度概念","LU2236285917.USD":"ALLIANZ GLOBAL INCOME \"AMG\" (USD) INC","BK4585":"ETF&股票定投概念","TTM":"塔塔汽车","LU0158827948.USD":"ALLIANZ GLOBAL SUSTAINABILITY \"A\" (USD) INC","LU0289739343.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (SGD) ACC","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD","LU0965509283.SGD":"AB LOW VOLATILITY EQUITY PORTFOLIO \"AD\" (SGDHDG) INC","LU0672654240.SGD":"FTIF - Franklin US Opportunities A Acc SGD-H1","LU0861579265.USD":"联博低波幅策略股票基金A","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","BK4211":"区域性银行","LU1712237335.SGD":"Natixis Mirova Global Sustainable Equity H-R-NPF/A SGD","LU0289961442.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"AX\" (SGD) ACC","LU1548497426.USD":"安联环球人工智能AT Acc","LU1623119135.USD":"Natixis Mirova Global Sustainable Equity R-NPF/A USD","LU0965509101.SGD":"AB LOW VOLATILITY EQUITY PORTFOLIO \"A\" (SGDHDG) ACC","BK4527":"明星科技股","LU1815333072.USD":"THREADNEEDLE (LUX) GLOBAL FOCUS \"AUP\" (USD) INC","BK4588":"碎股","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC"},"translate_title":"根据自由现金流和FCF利润率，Adobe股票有20%的上涨空间","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TTM":1,"ADBE":1,"FCF":1},"content_text":"Adobe Inc (ADBE) generated strong free cash flow (FCF) and FCF margins in its latest quarterly report. Even after Friday's huge runup, ADBE stock still has a 22% upside over the next year. Shorting OTM puts could be a good play here.\nADBE rose 14.5% to $525.31 on Friday, June 14, after the company released its fiscal Q2 earnings on June 13. However, ADBE stock could have at least a 22% upside over the next year to $640 per share. \nStrong FCF and FCF Margins\nThis is based on its FCF margins which rose to over 35.7% during the quarter. The company generated almost $2 billion in operating cash flow ($1.94 billion), and after a small capex spend of $41 million, its FCF came in at $1.899 billion. That represents 35.77%, almost 36% of its $5.309 billion in sales during the quarter (sales rose 10% YoY).\nMoreover, this represents a significant increase in its FCF margins over the last year. For example, based on Seeking Alpha data, Adobe generated $6.368 billion in trailing 12-month (TTM) FCF for the year ending May 31. That represented 31.1% of its TTM revenue of $20.429 billion.\nGranted, last year's Q2 quarter had higher FCF margins at 41.9% (i.e., $2.018b FCF/$4.816 b in sales). However, its Q2 FCF margins rose 15% from the TTM figure of 31.1% to 35.7%. This augurs well for the company's valuation in the future.\nFor example, analysts now forecast that sales for the fiscal year ending Nov. 2025 will rise from $21.47 billion expected this year to $23.94 billion. Assuming FCF margins stay at 36% over the next year, FCF could increase to $8.6 billion (i.e., 0.36 x $23.94b). That represents a 34% gain over its $6.4 billion TTM FCF.\nThis implies there could be a significant upside in ADBE stock.\nTarget Price for ADBE Stock\nFor example, what if the company were to pay out a dividend (it does not do so now) using all of its FCF? The market would likely give the stock at least a 3% dividend yield, and possibly as much as a 2.5% yield.\nHere is what that implies. If we divide the $8.6 billion in FCF by 3.0% we get a market cap estimate of $286.7 billion. That is 21.8% over its existing $235.34 billion market value, even after Friday's run-up.\nMoreover, using a 2.5% FCF yield metric, ADBE could have a $344 billion market cap (i.e., $8.6b/0.025 = $344b). That is 46% higher.\nBut just to be conservative, using a 21.8% upside ADBE stock could be worth $640 per share.\nAnalysts Target Price Agree\nAnalysts tend to agree with me. For example, Yahoo! Finance has a survey of 32 analysts showing that their average price target is $610.68 per share. Barchart's survey says the average analyst price target is $613.27 per share, an upside of 16.7% from here, even after Friday's rise. AnaChart.com's survey shows a $587.16 price target.\nIn effect, almost all analysts see a higher price for ADBE stock over the next year. AnaChart, a new sell-side analyst tracking service shows that Michael Turrin, of Wells Fargo, has a $700 price target for the stock. He raised that from $690 two days ago. According to AnaChart, he has hit his price targets over two-thirds of the time.\n\n\n\n  AnaChart - ADBE target price targets\n \n\nIn fact, as the table above shows, all the highest-rated analysts who have changed their recommendations recently have hit their price targets well over half the time. They project higher target prices for ADBE. That should tell you something about how cheap the stock is now.\nOne way to play this is to sell short out-of-the-money (OTM) put options. The reason is to both gain income (as there is no dividend) and also possibly buy in cheaper if the stock falls.\nShorting OTM Puts for Income\nFor example, look at the July 5 expiration date for put options in ADBE stock, which is three weeks from now. It shows that the $510 strike price, which is 2.91% below Friday's close, are trading at $5.40 on the bid side.\nThat represents an attractive 1.0% yield to the short seller of these puts (i.e., $5.40/$510.00).\n\n\n\nADBE puts expiring July 5 - Barchart - As of June 14\n\n\nHere is how that works. The investor must first secure $51,000 in cash or margin with their brokerage firm. Then they can enter an order to “Sell to Open” 1 put contract for expiration on July 5, three weeks from now at the $510 strike price.\nThe account will then immediately receive $540. That is why this is a 1.05% immediate yield opportunity (i.e., $540/$51,000 invested over that period). The investor expects that the put price will slowly deteriorate to zero if the stock does not fall to $510 on or before July 5. That way they keep the yield (no matter what) and have no obligation to buy 100 shares at $510 with the secured cash. \nThis works especially well for existing investors to gain extra income. But it also represents a way for non-shareholders to set a buy-in target price. At least then, even if their short puts are exercised, the investor has a breakeven price of $510-$5.40, or $504.60, which is 3.94% below Friday's close. That makes it a bargain purchase price.\nMoreover, if the investor can repeat this play over the next quarter, the expected return (ER) is $2,160 on the same invested amount. That means the ER yield is 4.235% over the next quarter. That is a fantastic potential return, even if the stock price stays level here.\nThe bottom line is that ADBE stock looks very cheap here. One way to play this is to sell short OTM puts to gain extra income.More Stock Market News from Barchart \n\n3 Ultra High-Yield Dividend Stocks to Pounce On at Every Dip\nShould You Buy the Dip in DocuSign After Earnings?\nUp 27% YTD, How Much Higher Can This Small-Cap Clean Energy Stock Rise?\nIs This Underperforming Deep Value Stock a Buy for Its 5% Dividend Yield?\n On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.28.1","shortVersion":"4.28.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2444497416"}