It concludes, ‘Adobe is the epitome of a great business, and shareholders with a long term view can reasonably expect to achieve market beating returns well into the future.’
Not sure if it is a ‘Saul Stock’ with a P/E over 50 - but if Amazon and Shopify qualify, who knows?
In the past, Adobe had a reputation for squandering its capital, giving it a weak ROIC and poor share price appreciation. If that’s changed it’s worth a look.
a swiftly growing technology company transitioning to a subscription business.
Because it’s not a growth business.
Just as Google is dominated by search, Adobe is dominated by Creative Suite.
Unfortunately for Adobe, the graphic artist market isn’t growing very much. And pretty much every artist that needs CS has CS. The “growth” that they’ve seen is from the subscription model forcing people to not steal the software, since every copy talks to Adobe’s servers pretty frequently. The revenue bump per artist has been from continued subscription pricing instead of buying one copy and using it for 5 years.
There is room for a bit of growth in Adobe’s Creative Cloud subscriptions. I don’t have the numbers on how big this market is relative to their overall addressable market. It’s probably not substantial, but it’s at least worth mentioning that the trend in TV & Movie production has been to move away from Final Cut Pro and to Adobe Premiere.
Granted in professional post production, Final Cut had been a 2nd choice to the more popular Avid Media Composer. But I think that Adobe’s Premiere will continue to eat away at Avid’s lead. Especially if they’re able to implement an elegant shared storage solution, which is by far Avid’s strong suit.
…it’s at least worth mentioning that the trend in TV & Movie production has been to move away from Final Cut Pro and to Adobe Premiere.
The small size and lack of growth in that pro market is exactly why Apple repositioned FCP for consumers (OK, advanced consumers) instead of professionals. There’s not much new money to be earned there. Apple originally did FCP (and Aperture) to show what their hardware was capable of, but now everyone knows visual professional prefer Macs, so not a whole lotta reason to keep going, at least as long as Adobe keeps their Mac versions up to snuff.
A couple years ago, Avid had 3200 customers for Avid Media Composer. Even if that was an order of magnitude higher today, it’s a drop in the bucket for Adobe.