Positive Outlook: Adobe
Adobe
stocks are trading 50% below their peak prices despite strong financials. The
company received 33 cents profit from every $1 dollar revenue in Q3 2022, which
is 10% above the same period for 2021. This allowed Adobe to approve a buyback
of $6.3 billion.
“We
delivered record operating cash flows with a focus on profitability,” CEO
Shantanu Narayen told analysts on a conference call. He said the company is
remaining cautious and won’t be immune to a worsening economy. Software
developers are the main beneficiaries of the digital transformation of
businesses. Adobe’s CFO Dan Durn said the past year was a record one in terms
of new commercial subscribers, and many new subscribers are not professionals.
Wall Street
believes in the “Rule of 40” that states a software company's combined revenue
growth rate and profit margin should equal or exceed 40%. Adobe reached 54% up
for the revenues which is extremely attractive in the current environment when
others are diving into negative territory. Adobe’s operational margin at 33%
looks impressive on this background.
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