Bunifa Latif
2023-01-08

$Adobe(ADBE)$ $Adorbs Inc.(ADOB)$ 

Adobe Inc is one of the largest and most diversified software companies in the world. The company offers a line of products and services used by professionals, communicators, businesses, and consumers for creating, managing, delivering, measuring, optimising, engaging, and transacting with content and experiences across various digital media formats. Business segments include Digital Media, Digital Experience, and Publishing and Advertising. The company operates in the Americas, Europe, Middle East and Africa (“EMEA”), and Asia-Pacific (APAC). The company offers many of the products via a Software-as-a-Service (“SaaS”) model or a managed services model through term subscriptions and pay-per-use.

Investment Overview

To benefit from continuous digitalisation. Adobe has an early mover advantage with its SaaS transformation in 2009, achieving 80% SaaS revenue since 2017. The SaaS transformation triggered robust revenue growth along with margin improvement. In 2021, ADOBE achieved 38% operating margin, which is among the highest of its peers. The company offers high growth opportunities riding on the trend that businesses will continue to adopt digital solutions.

Equipped to capture the expanding addressable market. Adobe’s total addressable market is projected to be US$147bn and US$205bn for 2023 and 2024 respectively according to the management. The company's steady flow of popular innovations, and acquisitions help it to be in a strong position to gain market share in an expanding market. This is key to the company's long-term growth trajectory.

Wide range of product offerings with high customer stickiness. Adobe offers a wide range of products with high value-add to both individual and corporate customers. Their Creative Cloud provides the tools necessary to create content in any format, Document Cloud contains its signature product Acrobat that helps customers to create fully digital workflows, and Experience Cloud offers one-stop shop for businesses to sort their marketing, advertising and analytics needs. Customer stickiness is also high for Adobe, which leads to more opportunities to upsell.

Global economic uncertainty. An economic slowdown may lead to a reduction in enterprise spending on digital products.

Intensifying competition. Adobe participates in a highly competitive environment globally with a wide range of competitors in various industry segments. Intensifying competition could create downward pressure on product pricing and margins.

For now it looks like a decent buy! But DYODD

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