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We came across a bullish thesis on Adobe Inc. (ADBE) on Value Investing Subreddit Page by jackandjillonthehill. In this article, we will summarize the bulls’ thesis on ADBE. Adobe Inc. (ADBE)'s share was trading at $374.98 as of April 30th. ADBE’s trailing and forward P/E were 24.77 and 18.38 respectively according to Yahoo Finance.
Adobe
Adobe presents a compelling investment case as a dominant, high-margin software company currently trading at a fair valuation around $360–$370 per share. Despite a trailing P/E of 24x, the company consistently generates free cash flow well in excess of earnings due to non-cash expenses like depreciation and amortization, and a subscription model that boosts float through deferred revenue collection. Adobe's business fundamentals are exceptionally strong: it boasts operating margins of 36% and free cash flow margins north of 40%, powered by a low-capex, high-R&D model—only about 1% of revenue goes toward capital expenditures, while R&D consumes 18%. Return on equity stands at a staggering 50%, underscoring the company’s capital efficiency and pricing power. Notably, Adobe rarely raises prices, and when it does, customer churn is minimal, pointing to high user stickiness and switching costs, especially as the installed base becomes increasingly fluent in its ecosystem of tools.
The balance sheet further supports the investment case. With $7.4 billion in cash against $6.1 billion in debt at sub-5% interest rates, Adobe is effectively underlevered, and the true cost of debt is even lower post-tax. Adjusted equity sits around $54 billion, meaning the company could comfortably take on more leverage to repurchase shares—something it already does aggressively. Share buybacks have been reducing the float by over 2% annually, even with substantial stock-based compensation, highlighting both discipline and shareholder alignment.
Adobe’s revenue engine is driven by its Digital Media segment (74% of revenue), with Creative Cloud and Document Cloud contributing 58% and 15%, respectively. The Digital Experience segment (25%)—born from the $1.8 billion Omniture acquisition in 2009—adds a powerful marketing and analytics layer that creates a full-stack offering from creative production to performance measurement. While Adobe has faced competition, it has generally responded effectively. It lost some ground in UI/UX design to Figma—an acquisition attempt that was ultimately blocked—but countered Canva’s simplified content creation tools with Adobe Express, which is gaining traction, especially on mobile platforms. In the document space, Adobe faces competition from Docusign in e-signatures, but maintains an edge with its broader suite of PDF and document preparation tools, bolstered by the AI-powered Adobe Sensei.