10 Best Quality Stocks to Buy According to Analysts

2. Adobe Inc. (NASDAQ:ADBE)

Average Upside Potential: 26.04%

Number of Hedge Fund Holders: 107

Adobe Inc. (NASDAQ:ADBE) is best known for its Adobe Creative Cloud suite, which includes popular applications like Photoshop, Illustrator, Premiere Pro, and InDesign. Its software is used by professionals in various industries, including graphic design, photography, video editing, and web development. It also offers other products and services, such as Acrobat (for PDF creation and editing), Experience Cloud (for digital marketing), and Document Cloud (for document management).

The company has bought back 10% of its shares since it started a program to buy back $25 billion of its stock. It has a market share of over 80% in graphic design because it has been developing products for many years. In the third fiscal quarter of 2024, its total revenue grew 10.59% year-over-year, where the Digital Media segment grew by 12%, and the Digital Experience segment grew 12%.

Its revenue has grown by 15.26% per year over the past four years. AI features like Adobe Firefly have helped customers use Adobe’s products more and stay with them longer. Document Cloud sales reached $807 million in the FQ3 2024, 18% higher year-over-year. This shows how AI is helping Adobe Inc. (NASDAQ:ADBE). However, AI tools are becoming more common and cheaper, which could be a problem for the company. At the same time, it is spending a lot of money on AI to improve its products. How well Adobe uses AI will decide how successful it is in the future.

Adobe Inc. (NASDAQ:ADBE) has added over 100 AI features to its products, like Creative Cloud, Document Cloud, and Experience Cloud. Adobe’s Firefly AI models are becoming popular, and the Express mobile app with Firefly has increased the number of people using it every month. With a strong focus on AI integration and a large total addressable market, the company is expected to continue growing at a healthy rate.

Polen Global Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q2 2024 investor letter:

“With Adobe Inc. (NASDAQ:ADBE), in some ways, we see it as a microcosm of the market’s “shoot first, ask questions later” approach to categorizing AI winners and losers. In the early part of last year, Adobe came under pressure with a perception that generative AI (GenAI) would represent a material headwind to their suite of creative offerings. In short order, the company introduced its GenAI offering, Firefly, which shifted the narrative to Adobe as a beneficiary with a real opportunity to monetize GenAI in the near term. Earlier this year, that narrative was again challenged as the company reported a slight slowdown in revenue growth. Results in the most recent quarter were robust as the company raised its full-year forecast across a number of key metrics and showcased better-than-expected results.”