Adobe
- Morningstar Rating: 4 stars
- Morningstar Economic Moat Rating: Broad
- Morningstar Uncertainty Rating: High
- Industry: Software - Applications
Next on our list of the best AI stocks to buy now, Adobe is trading 29% below our fair value estimate of $590 per share. Adobe claims to offer the software products that creative professionals rely on, including Photoshop, Illustrator and InDesign, and we believe the company has built a wide economic moat around its business.
"Adobe has established a dominant position in the content creation software space with its iconic Photoshop and Illustrator solutions, both part of the broader Creative Cloud. The company has added new products and features to the suite through organic development and targeted acquisitions to offer the most comprehensive portfolio of tools for creating print, digital and video content. The launch of Adobe Express in December 2021 helps to further expand the company's customer base as it includes popular features of the full Creative Cloud but at a lower cost and in free versions. The launch of Firefly in 2023 is an important artificial intelligence solution that should also attract new users. We believe that Adobe is rightly focused on attracting new users and believe that converting these users will become more important over time.
CEO Shantanu Narayen gave Adobe another growth engine in 2009 with the acquisition of Omniture, a leading provider of web analytics solutions. Omniture forms the basis for the "Digital Experience" segment, which Adobe uses as a platform for a variety of other marketing and advertising solutions. Adobe benefits from Creative Cloud's natural cross-selling opportunities for the business and operational aspects of marketing and advertising. Following the acquisitions of Magento, Marketo and Workfront, we expect Adobe to continue to focus its M&A activities on the Digital Experience segment and other emerging areas.
The Document Cloud is based on one of Adobe's first products, Acrobat, and the ubiquitous PDF file format developed by the company. It is well on its way to becoming a $4 billion business. The rise of smartphones and tablets combined with bring-your-own-device and mobile working models has made a file format that can be used on any screen more relevant than ever.
Adobe expects to tap into a market worth well over 200 billion US dollars. The company is introducing and leveraging features across its various cloud offerings (such as Sensei artificial intelligence) to deliver a more consistent experience, attract new customers, sell higher-priced solutions to users and cross-sell digital media offerings."
Dan Romanoff, Senior Analyst at Morningstar
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