If you like discount stocks, there are many possibilities Adobe (NASDAQ:ADBE) has caught your attention. Shares of the software company are down more than 60% from their early 2024 peak, dragging its trailing-12-month price-to-earnings ratio to just under 14. That’s as cheap as the stock has been since 2009, amid economic turbulence stemming from the subprime mortgage crisis.
However, cheap stocks are not necessarily stocks worth buying; As the old cliché reminds us, cheap stocks are cheap for a reason. And this begs the question: Which side of the fence is Adobe on?
Will AI create the world’s first billionaire? Our team just published a report on a little-known company called “Indispensable Monopoly” that provides critical technology that both Nvidia and Intel need. Continue “
The stock’s sharp rise from 2012 to 2021 makes a lot of sense. That’s when the company began offering cloud-based access to a suite of business-oriented design and imaging applications called Creative Cloud. Shortly after, Adobe introduced what it calls Experience Manager, which gives businesses the cloud-based ability to personalize an individual’s experience with a website, as well as collect valuable data about that customer. Both were well received.
However, things began to change in 2022. While few would have imagined this was possible at the time, the release of ChatGPT in late 2022 sparked an artificial intelligence (AI) arms race that has since brought a staggering amount of software and visual design tools to the software space. Many of them also do not require any computer coding knowledge. Since they can get something similar elsewhere, often at a lower cost (if not free), businesses often no longer need what Adobe offers.
That is the presumption, although the figures do not yet confirm it. Adobe’s revenue and profit growth continues to advance at the same pace it has been doing for the past decade. Investors are waiting, and even counting on, for the other shoe to arrive. He just hasn’t done it yet. However, the bearish assumption behind this stock’s continued weakness still holds.
Adobe is apparently unfazed by the arrival of affordable alternatives to its tools… until now. Just keep in mind that many of these options are relatively new, and there are still some kinks to work out.
A recent study by the University of Waterloo in Canada, for example, indicates that only about three-quarters of automatically generated computer code was correct and secure, consistent with CodeRabbit’s findings last year. These are many more mistakes than human programmers tend to make. And, as AI coding improves, these errors become harder to find. Enterprise customers cannot afford to take on this level of risk.
