9. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Shareholders In Q1 2024: 108
Adobe Inc. (NASDAQ:ADBE), the well known global productivity software firm, is down by 23% year to date, which stands in contrast to the S&P 500’s 11% gain. Among the reasons behind the drop is the latest quarterly result that saw Adobe Inc. (NASDAQ:ADBE) beat analyst EPS and revenue estimates. Wall Street was focused on the current quarter, and the shares tumbled by 11% as the high end of Adobe Inc. (NASDAQ:ADBE)’s $5.30 billion in guidance missed analyst estimates of $5.31 billion.
By the end of this year’s first quarter, 108 hedge funds covered by Insider Monkey’s study were Adobe Inc. (NASDAQ:ADBE)’s stakeholders. Among these, Ken Fisher’s Fisher Asset Management owned the most valuable stake which was worth $2.2 billion.
While the shares are down, Adobe Inc. (NASDAQ:ADBE) could turn the tide in the AI industry. Its tools have generated more than six billion AI assets since Q1 2023, and the firm seems to be focusing on creating new AI tools as R&D expenses grew by $112 million annually in the latest quarter. A forward P/E of 24.75 still makes the stock slightly overvalued over the S&P 500. While the revenue guidance led to a share price fall earlier this year, Adobe Inc. (NASDAQ:ADBE) is still a leading player in the enterprise software market. During its earnings call for the first quarter of 2024, Adobe Inc. (NASDAQ:ADBE) president David Wadhwani elaborated that Adobe Express, his firm’s cloud based content creation tool, had integrated Adobe’s Firefly Services AI platform, leading to ‘delighted’ customers generating content like “images, vectors, designs and text effects.”
Here is how RiverPark explained the recent weakness in Adobe shares:
“Adobe Inc. (NASDAQ:ADBE): ADBE was our last top detractor in the quarter following OpenAI’s announcement of an AI-based text-to-video offering called Sora. Some investors seem to believe that AI and the Sora product specifically pose an existential threat to Adobe’s Creative Cloud Suite. We do not share these concerns and believe that AI is a tremendous growth opportunity for Adobe. In fact, in a recent conference call, management described how innovative AI-based solutions are expected to be drivers of growth across its product lines.
ADBE is the leading software and solutions provider in the content creation and content management space. The company offers a line of products and services used by creative professionals, communicators, businesses of all sizes, and consumers for creating, managing, delivering, measuring and optimizing content and experiences across personal computers, smartphones, other electronic devices and digital media formats. The company has grown revenue in the double-digit percent range for the last decade, and as it enters its 42nd year since its founding, we expect ADBE to continue to grow revenue greater than 10% per year through 2028. The company generates 40% EBITDA margins, which we think can expand to nearly 50%, and we believe the company will more than double last year’s roughly $7 billion of free cash flow over the next five years.”
