Should You Invest in Adobe?

OVERVIEW

Adobe Incorporation designs and sells creative software for consumers to create and monetize content. Consumers like small and large businesses as well as individuals can create content on the company's several application and cloud-based products.

Why You Should?

1. The COVID-19 Pandemic has positively benefited the company. Small and large businesses have had to move operations online and Adobe provides key software for a strategic and efficient shift in operations to these companies. Individual consumers may also now find time to use Adobe’s software.

2. Adobe’s products have seen a rise in popularity before this pandemic. Its user-friendly products were seeing spikes in demand as consumers wanted to improve their digital footprint.

3. Adobe has a strong balance sheet which allows it to weather out this pandemic and come out as a stronger company. This is due to the increasing popularity of its products. The graph below shows that Adobe reported revenues of around 11.2 billion and profits of around 3 billion during the financial year of 2019. Both of these key metrics are up from the financial year of 2018 when the company reported revenues of around 9 billion and profits of around 2.6 billion.

4. Adobe has a diverse business and a wide variety of products. For example, they operate individual applications to a Creative Cloud service as well as solutions for consumers to create as well as analyze trends. This positively benefits the company as it has garnered a variety of small and enterprise consumers who have become extremely loyal to the company’s platform.

Why You Should Not?

  1. One of the biggest issues investing in Adobe is that its older core products have seen a steep drop in demand as new technology has entered the market. For example, Youtube once used Adobe Flash to run but now uses a new kind of technology called HTML5. This is not good for the company as it will see a drop in revenues from its products.
  2. Adobe still has competition from large players in the digital software space. Companies like Apple, Google, and Microsoft all have competing products. Unlike Adobe, some of these companies have smoothly integrated their software into their other products. Adobe still relies on other companies to manufacture hardware and distribute their products on it. This will hurt the company’s growth in the future.

MY OPINION

In my opinion, I think that Adobe is a great long term investment due to its wide range of products. However, investors should know that Adobe’s older core products have fallen in demand and that competition is high in the digital software space.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.