Why Adobe is a Long Buy and Analysis of Q2 Fiscal 2022

PUBLISHED Jun 27, 2022, 7:39:12 AM        SHARE

img

Adobe Inc. is a top tech company developing software to produce different content such as graphics, motion pictures and multimedia. The company has grown steadily, making some of the best-rated innovative products in the market.

Additionally, it has acquired several viable businesses that have improved Adobe's operations and stayed ahead of competitors. It has collaborated with NVIDIA in its operations for over ten years.

During this highly dynamic turbulence in the stock market, it isn't easy to figure out what works for you. Most stocks appear cheap compared to their value, but you need a deeper analysis to understand.

The bearish waves in the stock market make most stocks seem reasonable, inciting investors to buy the dip. This is primarily attributed to fears of recession and high inflation rates.

The price of Adobe stock was volatile during the last quarter, and the stock price went down. The management attributed the dip to the war in Ukraine, which led to the company's decision to stop all new sales in Russia and Belarus and summer seasonality.

The Federal Reserve has increased interest rates to reduce inflation, strengthening the U.S dollar. The management referred to the last quarter's economic development as 'uncertain'. However, they were optimistic about the new team on board, sourced from talent acquisition.

Analysis of Adobe Quarter 2 Fiscal 2022

Adobe's Q2 Fiscal 2022 ended on 3 June. The most notable figures were the 14% revenue growth YoY and a net income of increase of 6%. The company’s digital media segment had an impressive 15% increase in revenue.

In the last quarter, Adobe announced increased prices for specific creative cloud subscriptions. The increase is due to the launch of new subscriptions. The company's primary goal is to add new users; therefore, they did not go all out on the price hikes.

According to CEO Shantanu Narayen, Adobe is now targeting to acquire new targets since the prices are now more favourable.

Adobe Quarter 2 Fiscal Year 2022 Financial Highlights

• Revenue of $4.39 billion. • Diluted GAAP EPS of $2.49 and non-GAAP of $3.35 • GAAP operating income of $1.53 billion and non-GAAP of $1.97 billion • GAAP net income of $1.18 billion and non-GAAP of $1.59 billion • $2.04 billion operations cash flow • RPO of $13.82 billion • The remaining Performance Obligations ("RPO") exiting the quarter were $13.82 billion. • A share repurchase of 1.9 million shares

• Deferred revenue of $4.88 billion

Source:Adobe News

Why Adobe is a long buy

When considering to purchase, it is wise for an investor to analyze a stock's past performance. Adobe stock has been growing steadily and consistently in the past. As expected with any stock, it has fluctuated from time to time, depending on the market factors, but the performance has been good overall.

Adobe has experienced high growth in the past, which has seen investors willing to invest more resources. We will examine why Adobe is a potential buy-and-hold stock by considering fundamental and macro events that influence price movements.

Considering the increased value in Adobe stock in the past years, it is likely that the upward momentum will continue. Below are the three main reasons why Adobe is a long buy.

Healthy financial performance

In the last year, revenue increased by 23% and operating income by 37%. The company’s growth is mainly from Digital Media and Digital Experiences. The company also makes significant revenue from subscriptions.

In 2021, subscriptions contributed to 92% of the total revenue. The income from recurring subscriptions has fewer revenue expenses and therefore increases profits. The increased overall revenue has improved the company's gross margin,

Potential for growth

Tech is the future, and most tech companies may be around for a while since there is room to explore the industry. Adobe has been successful in the past, which gives confidence in its future.

The management has very optimistic projections. For example, it believes the TAM for its creative cloud products estimate is $63 billion.

The figure may seem exceedingly ambitious compared to the $9.6 billion in innovative revenue. However, it is possible if the company increases its market share significantly.

Adobe aims to improve its products, directly translating to new consumers and increasing revenue.

Efficiency in operations and share repurchases

The business efficiency of the company is improving, therefore improving financial performance.

Over the past two years, operating expenses have decreased compared to the revenue. This shows the company can keep costs in check and maximize increasing its revenue.

The company's share repurchase program strengthens its stock and helps it maintain authority over its shares. Over the last four years, the company has repurchased an estimated $12 billion of its shares.

Takeway

The company's growth is foreseeable based on the increasing success of its cloud products. Subscription revenue increases every quarter. There is great promise in its adaption across most mobile apps.

The world is constantly changing toward a digital economy. Companies like Adobe which are at the forefront of the revolution will be the biggest winners.

There is an increased demand for online video content, which has increased the market. Adobe's products are likely to get overwhelming demand in the near future.

The demand will likely come from their creative innovations, strategic acquisition and development of high-tech applications. Investing is always a risk, but Adobe projects itself as a reasonable risk overall.

ADBE, Buy

Adobe Inc
Return: 35.40%

ADBE, Buy

Return: 35.40%


Sound investments
don't happen alone

Find your crew, build teams, compete in VS MODE, and identify investment trends in our evergrowing investment ecosystem. You aren't on an island anymore, and our community is here to help you make informed decisions in a complex world.

More Reads
With Oil Sky High, is Exxon a Buy?
Image

Pain at the Pump May Tempt Investors to Grab Big Oil

Here's How You Can Pay Your Utility Bills With Sempra Energy Stock Dividend
Image

Amid rising energy prices and the inevitable recession, the Sempra Energy Stock dividend is something you can rely on.

Why is Dominion Energy Stock Dropping? Is It Still Safe to Invest?
Image

Dominion Energy Stock is dropping for a long time, yet its dividend has not stopped attracting investors.

NIO STOCK FORECAST
Image

NIO is a multinational automobile manufacturing company. It is a Chinese company. Its headquarter is in Shanghai China.

Dow Jones & Company
Image

Dow Jones & Company is considered one of the world's largest business and financial news companies.

IS IT GOOD TO BUY OR SELL AMC STOCK NOW?
Image

AMC (American multi-cinema) Entertainment Holding, Inc. is an American movie theater chain. AMC is one of the largest movie theater chains in the world.

Why you should invest in Middlesex Water Company
Image

Water is life. With inelastic demand, the potential in the utility industry is inexhaustible. Therefore, investing in a water services company is a good bet. But why invest in Middlesex Water Company?

Astra Space Inc. NASA Rocket Failed to Deliver
Image

What is likely to happen in the next 72 hours is a further bludgeoning of Astra's Stock Price. But is it still a long term opportunity?

Is Disney a Buy?
Image

Post-Pandemic Entertainment vs Inflation/Recession

IS ZOOM STILL A BUY?
Image

During the pandemic, Zoom experienced fast accelerated growth with spectacular earnings. Its stock traded at among the highest prices in the market. Today, pre-pandemic cultures have resumed, and the video communications growth has slowed down. Is its stock still a buy?

NVIDIA: ANALYSIS OF FINANCIAL RESULTS FOR FIRST QUARTER FISCAL 2023
Image

On May 25, 2022, Nvidia Corporation reported its first quarter fiscal 2023 earnings. The results beat stock analysts speculations especially based on the last quarter’s outlook.

Is Astra Space Inc Still a Buy After Their SpaceTech Day?
Image

Astra's SpaceTech day shed light on Astra's significant strides into space. But is it enough to invest in the company?

Is Astra Space Inc. (ASTR) a Buy Right Now?
Image

Astra Space Inc. is a space stock that could potentially be a big player as the space industry matures. But with the market falling, is it a good stock to consider right now?

Lockheed Martin is a Great Dividend and Space Stock
Image

Lockheed Martin has a dividend yield of 2.5% as of Q2 2022. Let's discuss how LMT has kept a healthy dividend as a leader in space and military technologies.

Is Roblox Still a Buy in Q2 2022?
Image

Is Roblox (RBLX) still a buy, a hold, or a sell? Let's take a look at Q1 2022 to see what's changed for Roblox.

F45 vs CrossFit
Image

Attached is an article excepted from Pretty Brave Fitness, a group training organization for girls, on the differences between F45 and CrossFit. It focuses on which program could be best for women/girls but the information can be useful to men as well (i.e. cardio vs strength training) to determine the best option for your fitness goals.

Resources for Publishers
Resources for New Investors
Boosted with BossCoin
Financial Literacy Leaders
user_profile
Wise Intelligent
user_profile
Tom Hamilton
user_profile
Mark Robertson
user_profile
Kevin Matthews II
user_profile
Akeiva Ellis
user_profile
Brendan Dale
user_profile
Kenneth Chavis IV
user_profile
Sharita Humphrey