In this article, we will look at the 5 best long-term growth stocks to invest in. If you want to see similar stocks, you can also take a look at the 10 Best Long-Term Growth Stocks To Invest In.
5. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 92
Adobe Inc. (NASDAQ:ADBE) is a San Jose, California-based software company excelling in the design and graphics segment through its offerings like InDesign, Illustrator, and Photoshop.
Adobe Inc. (NASDAQ:ADBE) is diversifying from its current offerings and moving into providing its services over the cloud. In an attempt to further strengthen its position in the industry, Adobe Inc. (NASDAQ:ADBE) has agreed to buy its competitor Figma for $20 billion. The strategic acquisition will help Adobe Inc. (NASDAQ:ADBE) gain access to Figma’s total addressable market of $16.5 billion by 2025.
The company boasts strong fundamentals, with the operating income rising every year since 2014. Revenues increased by 13% from Q3 2021 to Q3 2022. The growth was primarily driven by subscriptions, demonstrating how popular Adobe’s services remain. While there may be concerns regarding the valuation of the company in the short term due to the bearish economic environment, analysts still expect Adobe Inc.’s (NASDAQ:ADBE) revenue to expand at a CAGR of 11% till 2030.
Polen Capital’s stance also reiterated the position of Adobe Inc. (NASDAQ:ADBE) as one of the best long-term stocks to own. Here’s what the investment management company said about Adobe Inc. (NASDAQ:ADBE) in its Q2 2022 investor letter:
“As an example of a valuation dislocation we’ve recently taken advantage of, we added to our position in Adobe Inc. (NASDAQ:ADBE) in the second quarter. It is now one of our top three holdings at just under 7% of the Portfolio. According to our research, Adobe has a near monopoly on digital content creation software globally and is a highly advantaged digital marketing and analytics business. The business continues to grow revenues and profits robustly, even in the face of large currency headwinds and macroeconomic weakness in parts of Europe.
We expect the company to continue to grow earnings at a highteens or better rate for the foreseeable future on the back of robust secular growth tailwinds in digital content creation and consumption. Adobe’s tools are the de facto standards for various applications such as graphics and video editing. In addition, Adobe stands to be a leader in providing tools for creators to develop aspects of the immersive internet (metaverse) as that develops as well.
Adobe’s share price has sold off considerably despite its healthy ongoing growth, similar to certain other companies commonly classified as technology businesses. It is now valued at less than 23x consensus 2023 earnings estimates. This is a discount to companies like Coca-Cola, Colgate, Clorox, McDonald’s, and Proctor & Gamble. Each of these consumer staples companies could be considered a good business by any unbiased observer. Yet, our research tells us that each one is also likely to only grow earnings at a single-digit pace because they face more competition and sell into more mature markets than Adobe. The last time we saw dominant, faster-growing businesses like Adobe trading at discounts to more challenged, slower-growing consumer staples businesses like Coca-Cola was in late 2008/early 2009 during the Financial Crisis. We are not making a market call, but we are starting to see valuation discrepancies that we can take advantage of for our Portfolio.”
