A lot of our followers have been asking me about Adobe and if at its current valuation of P/E 21 if its actually a good buy. So here’s a simple yet specific analysis on what’s happening to Adobe right now.
The Reason
Investors in Adobe are increasingly cautious because of rising competition from AI-driven tools like Figma, Canva, and other image creation platforms. This has created some skepticism around Adobe’s future growth prospects and long-term positioning in the creative software market.
That said, let’s take a closer look at the numbers.
While Adobe’s stock has faced pressure, the company is still delivering relatively healthy sales. Despite the noise around competition, Adobe continues to grow earnings quarter after quarter. In its most recent quarter, revenue grew 1.95%. That’s slightly below its historical average of 2.86% quarterly growth since 2019, but growth is still positive. The slowdown is worth noting, but not alarming in itself.
Net profits, however, have been less impressive in the past two quarters compared to February. The main culprit is higher selling and marketing expenses—up 8%—which only translated into a 1.95% revenue lift. That imbalance could be an early warning sign, as spending more to generate relatively modest growth isn’t a sustainable long-term formula.
On valuation, Adobe currently trades at a reasonable historical P/E of 21, which makes it look undervalued compared to peers. Our current intrinsic value for Adobe currently priced it at xx% lower on its $346 price point. For me, that’s enough reason to stay put. I already hold a position in Adobe, and while I’m not rushing to buy more, I’m also not selling. For now, it’s a stock I’ll keep holding and watching closely, especially to see how management balances costs with growth in the coming quarters.