Adobe: Our Top Idea For 2025 Now Trading At A 30% Discount To SaaS Peers

Summary:

• Adobe, trading at 21.6x forward earnings, trades inline with the S&P 500 despite better growth and a superior business model. Microsoft and Salesforce trade at over 30x forward earnings, despite similar growth expectations for all three names in 2025.
• Adobe’s Q4 results were solid with 11% YoY revenue growth, record Digital Media ARR, and strong EPS growth, despite market concerns.
• 2025 guidance was slightly below expectations, but Adobe’s recurring revenue, pricing power, and AI advancements support continued growth and potential upside.
• With a strong balance sheet and significant stock buybacks planned, Adobe is poised for substantial upside, targeting $550-$691 in the next few years.

Summary

We at Cash Flow Compounders look for high margin, low capital intensity businesses that are able to grow at above market rates. We especially like finding these when trading at sub-market multiples.

Adobe fits the bill admirably today. While many

Analyst’s Disclosure: I/we have a beneficial long position in the shares of ADBE either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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