Mr. Market was paying $548.76 for Adobe (ADBE) shares on 13 October 2023. Hence, many investors ask: is Adobe worth $548.76?
My answer is no because Adobe had just $29.090 in billion total assets and $7.516 billion in cash and short-term investments on 31 August 2023. I think those numbers do not justify a $566.50 share price.
Moreover, Adobe reported quarterly revenues of $4.89 billion, a quarterly gross profit of $4.310 billion, and a quarterly operating income of $1.697 billion on 31 August 2023. There was also a $1.873 billion quarterly operating cash flow and a $1.145 billion quarterly ending cash flow on 31 August 2023.
Those numbers do not support a $566.50 share price.
Adobe (ADBE) is Growing
However, Adobe is growing. For example, Abode’s quarterly ending cash flow grew from $505 million on 31 August 2022 to $1.145 billion a year later.
Meanwhile, the quarterly operating cash flow grew from $1.704 billion on 31 August 2022 to $1.873 billion on 31 August 2023. Impressively, the cash and short-term investments grew from $5.764 billion on 31 August 2022 to $7.516 billion on 31 August 2023. Plus, the total assets grew from $26.744 billion on 31 August 2022 to $29.090 billion a year later.
Comparatively, the quarterly revenues grew from $4.433 billion on 31 August 2022 to $4.89 billion on 31 August 2023. Stockrow estimates Adobe’s revenues grew by 10.31% in the quarter ending on 31 August 2023. Adobe reported quarterly revenues of $4.816 billion on 31 May 2023.
In contrast, the quarterly gross profit grew from $1.484 billion on 31 August 2022 to $1.697 billion on 31 August 2023. Plus, the quarterly operating income grew from $1.484 billion on 31 August 2022 to $1.697 billion on 31 August 2023.
There is growth at Adobe, but I do not think it justifies the $548.76 stock price. Notably, Adobe’s share price grew from $286.15 on 12 October 2022. Unfortunately, that growth does not support the stock prices.
What is Adobe (ADBE)?
Adobe (ADBE) is a historic software company that produces icon products such as Photoshop, Adobe Acrobat, Adobe Illustrator, and PDFs (portable document format). Younger people may not be familiar with Adobe.
However, anybody who has worked in an office has probably used Adobe products. Many people consider Adobe the gold standard in imaging and document management software.
The level of Adobe use is high. Adobe claims users opened over 400 billion PDFs with its products in 2022. They also claim the Adobe Document Cloud processed over eight billion electronic and digital signatures in 2022. Plus, they have downloaded Adobe Scan over 150 million times on Apple iOS and Android.
Adobe claims Adobe Analytics has analyzed over one trillion visits to US retail US websites and over 100 million product SKUs in 18 categories. Meanwhile, Adobe Stock offers over 345 million assets. Adobe Stock Assets include over 200 million photos, 115 million vectors and illustrations, 26 million videos, 73,000 music tracks, 3.3 million Premium assets, and over 900,000 free assets.
Thus, Adobe still achieves widespread use. But I think the use does not support the growth.
What Value Does Adobe Offer?
Despite the wide use, I think Mr. Market overvalues Adobe (NASDAQ: ADBE). One reason I consider Adobe overpriced because it offers no dividend.
I think investors need to avoid Adobe because there are better software stocks that offer dividends out here. For example, Microsoft (MSFT) and Oracle (ORCLE).
For example, Microsoft (MSFT) shares were trading at $329.2 on 12 October 2023. Yet Microsoft offered a 75₵ quarterly dividend, a $3 forward dividend, and a 0.91% dividend yield on 12 October 2023. Meanwhile, Mr. Market paid $109.11 for Oracle (ORCLE) which offered a 40₵ quarterly dividend, a $1.60 forward dividend, and a 1.47% dividend yield on 12 October 2023.
I think smart investors need to avoid Adobe until its share price falls to a reasonable level, and the stock pays a dividend.