It is a mega-giant of software development for graphic and web design, as well as printed products. The American concern introduces innovations in the fields of processing photo files, video files, graphics. To solve these problems, the issuer already has three most popular programs: Photoshop, Illustrator and Premiere Pro.
In the field of digital technologies, enterprise software is used for marketing, data analysis and management. Relatively recently, according to the combined opinion of global financial experts, Adobe was recognized as the leader in the list of software suppliers, the success of which is largely explained by the use of powerful developments in the field of artificial intelligence.
In addition to these well-known programs, the company's list of offers also includes SaaS services that continue to collect excess profits for several current years. Many analysts consider this product to be the component that will ensure the company's prosperity in the near future.
The basis of the product is that customers do not need to look for third-party suppliers of a particular service, the consumer receives all of them in full by issuing a single Adobe subscription. This fact leaves almost no room for competition in the market. Thanks to these advantages, the company managed to achieve record revenue figures of $12.9 billion for the current year.
In fact, the entire SaaS sphere is a multibillion-dollar market, which, according to minimum estimates, will reach $307 billion by 2026. Moreover, Adobe firmly occupies 10% of its volume. A somewhat larger part is given to Microsoft and Salesforce.
Read more: SaaS - Software as a Service
For many decades, the company has carried out global work, but in addition to intellectual values, it is worth paying special attention to the financial component. For about 4 decades, from year to year, the issuer continues to demonstrate consistently stable growth, supported by double-digit numbers.
Over the last quarter, Adobe reported an increase in indicators, including revenue. This figure was 23% year-on-year. An equally significant result was a double-digit increase in revenue in the main areas of activity. In the first half of 2021, the net profit of the IT megagigant increased by 16% compared to the same indicators in 2020.
Over the past year, the company's shares have grown by almost 30%, and in five-year terms - by more than 530%.
Even the pandemic crisis and lockdown could not cause serious damage to such a monumental giant. There are two explanations for this:
- The subscription to the platform's services lasts exactly one year. To cancel it, you need to pay a fairly large amount. So it is much easier for the client to continue using Adobe's offers than to cancel the subscription.
- The company has a huge segment of digital media under its jurisdiction. Due to the demand for its own products, the company has all the opportunities to form a pricing policy of the market.
The vast majority of the organization's revenue comes from the implementation of digital tools. Over the two quarters of this year, this segment grew by 25% and reached $2.79 billion.
In this regard, special attention should be paid to Creative Cloud, which owns Photoshop, Illustrator, Premiere Pro and other cloud service applications. Among digital media, Document Cloud with Adobe Acrobat and Adobe Sign located in it deserve special appreciation.
According to the forecasts of the organization's analysts, in the 3rd quarter, the growth of profitability indicators should be 22%, which is in relation to the same period last year. This figure, like nothing else, demonstrates that Adobe's rebirth into cloud services is successful and brings its results.
The digital media infrastructure also includes Digital Experience, a platform that provides organizations with tools for e-commerce analysts. This division previously included Adobe's Advertising Cloud, which was transformed into Publishing and Advertising in Q4.
Revenue from the platform increased by 21% over the year, which in monetary terms amounted to $938 million. After the merger of Adobe and Advertising Cloud with another division that previously showed unacceptable results,the segment was able to significantly improve its performance.
Adobe expects that it is Digital Experience that will allow to finish the third quarter with an active revenue growth of 21% for the period, that is, by 20% for the year.
The weak link
Despite its own perfection and steadfastness, the giant also has its own weaknesses. The main painful point is close cooperation with such a large partner as Microsoft and the Azure cloud. The partnership consists in adapting the tools of both megagigants relative to each other, for example, software for interacting with customers and the Office 365 package.
The Achilles' heel is where mutual understanding between companies ends. Adobe simply does not have its own data centers, which Salesforce and Oracle have. To implement its projects, Adobe rents data centers from a more influential partner – Microsoft. If the mutual understanding between these two companies ends, Adobe will not have a single chance to influence Microsoft. By the way, the capitalization of the first enterprise today is $315 billion, which is a drop in the ocean compared to Microsoft's 2.2 trillion.
What should I do with Adobe shares?
After the release of the financial statements for the 1st quarter of the financial year, Adobe announced the forecast for the future period compiled by analysts. The following indicators were included here:
- revenue growth-up to 20%;
- non-GAAP profit growth is about 17%.
However, the financiers have developed their own, more realistic forecast, where the annual revenue/profit ratio will be in the range of 22/21%, respectively. Investors expect that these indicators will amount to 15/14%. If the experts' estimates are justified, the group's profit will be 40 times higher than predicted by analysts, and the sales volume will be 17 times higher.
The company has been engaged in the repurchase of its assets for quite a long time. This is also one of the main reasons why their price is growing from year to year. In September, this indicator reached $670 per unit, then slightly fell back to the level of $640. There was a sharp rebound here, and the shares began to rise. At the moment, the maximum reached has not been updated, so analysts recommend refraining from buying. The momentum shows a continuation, and after breaking through the level of $670, we can talk about the next maximum of $740.