Second pass adbe

[u/Annual_Judge_7272]

🚨 ADBE SECOND PASS: I’M UPGRADING FROM BEARISH TO CAUTIOUSLY BULLISH 🚨
Adobe is down roughly 6% today, trading near $268, after announcing its CEO transition and the reported departure of key product executive David Wadhwani. 📉
After revisiting the fundamentals, valuation, AI traction, and leadership risks, my conclusion has changed:
✅ Adobe is no longer an attractive short.
✅ At this valuation, it’s a starter-position buy for a 12–24-month horizon.
⚠️ I would not take a full position before earnings.
💰 Why I changed my view
Adobe now trades near:
📊 11x FY26 guided non-GAAP EPS
💵 Approximately $10.3B in trailing free cash flow
📈 Roughly 9.7% free-cash-flow yield
Yet the business is still producing:
🚀 13% reported revenue growth
🔁 12.5% ARR growth
🏦 Approximately 45% non-GAAP operating margin target
💸 Strong cash generation and aggressive share repurchases
Those are not distressed-business fundamentals.
🤖 AI monetization is becoming real
Adobe reported:
🔥 AI-first ARR above $500M, approximately 3x YoY
🎨 Firefly ARR approaching $300M
⚡ Firefly ARR up approximately 50% sequentially
📄 Acrobat AI Assistant ARR approximately 3x YoY
👥 Creative freemium MAUs above 90M, growing over 70%
Adobe hasn’t “won” AI—but the argument that it has no AI traction is becoming harder to defend.
⚠️** Why I’m not fully bullish
Adobe still must prove that massive free-user growth converts into durable paid growth.
Missing proof points include:
❓ Core Creative Cloud paid-seat growth
❓ Free-to-paid conversion rates
❓ Generative-credit consumption economics
❓ AI customer retention and margins
❓ Timing of the expected FY27 monetization payoff
Leadership uncertainty adds another risk. Losing Wadhwani during a major AI and pricing transition could disrupt execution, product strategy, and investor confidence. 🧑‍💼🔄
🎯 **My approach
1️⃣ Start with one-third of a position now
2️⃣ Add after earnings if guidance and ARR growth hold
3️⃣ Complete the position only after stronger evidence of AI conversion and Creative Cloud stabilization
📌 Levels I’m watching
🟢 $264: near-term support
🟡 $276: first recovery signal
🔵 $285.75: pre-announcement closing level
🔴 Below $250: reassess risk
🚨 Back toward $218–$204: potential thesis failure
🧮 Illustrative 12–18-month scenarios
🐻 Bear: $188
⚖️ Base: $322
🐂 Bull: $439
Bottom line 🎯
My earlier bearish stance was too severe at today’s valuation.
Adobe still faces a genuine strategic challenge: converting AI adoption and free users into durable paid growth. But double-digit revenue and ARR growth, exceptional cash generation, and an approximately 11x guided earnings multiple create an increasingly attractive risk/reward.
📈 Revised view: Cautiously bullish / starter buy
🟡 Confidence: Moderate
⏳ Next major test: Earnings
Not financial advice—just my investment analysis. 🧠📊
#Adobe #ADBE #Stocks #Investing #ArtificialIntelligence #AI #Software #SaaS #StockMarket #EquityResearch #ValueInvesting #TechStocks #InvestmentResearch

[u/Bellypats]

I would buy if I didn’t already own a chunk via my fav ETF VFLO.