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This insight will, after seeing shares of Adobe stock explode from a low in January 2019 of $ 215 to a recent high of $ 385.
Shares have fallen slightly over the past week or so back to the $ 356 range. But even after this significant run, the ADBE stock is still a buy option that could fetch up to $ 450 per share by the end of 2020.
The bullfall for ADBE bearings
At present, it is impossible to argue against Adobe shares. Take a look at the company’s earnings report for the quarter and fiscal year 2019, consider how fast the company is growing.
First, revenues increased by 21% compared to the same period last year to $ 2.99 billion – which was slightly ahead of its own guidance of $ 2.97 billion. In addition, non-GAAP earnings per share (EPS) were $ 2.29, which is better than estimates at $ 2.25. That said, according to the guidelines, Adode expects to have a full-year budget for 2020 of $ 13.15 billion and non-GAAP earnings of $ 9.75 per share – both of which are just below estimates.
“Adobe’s phenomenal fourth-quarter results limited a record financial year 2019 with revenues in excess of $ 11 billion,” said President and CEO Shantanu Narayen. “Adobe’s vision, category leadership, continuous product innovation and large and loyal customer base place us well for 2020 and beyond.”
Three high-growth segments for Adobe
Overall, what I like most about Adobe is its powerful position in software. The company sells a series of products that almost all companies use. Also, what I like even more is the fact that Adobe bundles products and offers them with a monthly fee.
There is, for example, Creative Cloud Business. UBS analyst Jennifer Swanson Lowe said in a note to her clients that her company surveyed more than 300 creative buyers, and the results provided good insight into Adobe’s future.
“Data shows both growing adoption and increasing ARPU (average revenue per user) within the Creative Cloud base,” she said. “We see that this maintains high teenagers’ sales growth and EPS growth greater than 20%.”
She also believes that new users and increased sales from existing users will be a powerful catalyst as well.
In addition, there is the Adobe Document Cloud segment, which is growing rapidly as companies begin to move to digital documents instead of paper. There is also the Adobe Experience Cloud, which provides cloud services to digital businesses.
Overall, all three are seeing significant growth – creating increased growth and larger margins for Adobe.
“Adobe has generated 20% revenue and almost 90% gross margins for each of the last few years,” said InvestorPlace contributor Luke Lango. Even better are the products that are not met with a great deal of competition – if any at all.
The conclusion of Adobe Stock
In short, Adobe is a long-term winner that can continue to grow taller. Given the high demand for its products and strong profit growth, ADBE stock is one to buy and hold in the long run.
With this in mind, I think it could rally to $ 450 per share by 2020.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing shares and options for web-based advisory services since 1999. At the time of writing, Ian Cooper had no position in any of the above securities.