Adobe's 8x P/E signals that its outlook numbers are unreliable, its capital allocation is poor and it is likely a casualty of AI. It spent all its free cash flow buying back shares at $400 and is on a direct collision course with AI; no one can say its products will be as crucial as in the last two decades. Unlike Meta in 2022, whose ads business was never impaired, there are too many unknowns. It could work or stagnate for years, so it sits in the too-hard bucket even if multiples scream buy. … Show more

Adobe is not the SaaS stock to buy, even though SaaS stocks should see a revival, because more exciting second-tier names with similar buyback programs are on sale. Adobe's new $25B buyback, enough to retire about 25% of its shares at the current price, shows high confidence in its resilience rather than cash flows imploding from AI disruption. x.com  x.com 

Adobe's cash generation and growing AI subscriptions give its tentative turnaround fundamental support. It has $10.59B in free cash flow; revenue and EPS are expected to grow at double-digit rates through 2028, while AI-first ARR is up 150% year over year and Firefly ARR 40% quarter over quarter. Its Stage 1 base is attempting to break a long downtrend. x.com 

Adobe remains the best example of what not to buy because AI has had minimal impact and its backlog is slowing rapidly. Management chose user acquisition over monetization, as Duolingo did, leaving open whether users stay when prices rise; for now, waiting to monetize looks the same as being unable to. Free or cheaper tools that match its specialist subscriptions could cut usage, RPO and cash generation. When acceleration and margin expansion are everywhere, owning neither makes little sense. … Show more

The race to win AI is keeping Alphabet on a reckless spending path despite the damage to its share price. The expectation that spending would moderate has been wrong for a year; winning still takes precedence over the financial consequences, and a course correction has yet to arrive. x.com 

Adobe is a bit undervalued, though not significantly, at 13x earnings with 13% revenue growth. Its falling profit margin is concerning, and AI threats are growing as image generation improves. x.com 

Adobe is falling despite growing revenue and earnings because AI is disrupting its core image- and PDF-editing products, and that kind of disruption simply takes time to show up in the numbers. Newspapers after the internet and BlackBerry after the iPhone followed the same path. Anyone using AI to edit images or PDFs can see it. x.com 

Adobe could easily go the way of PayPal, its best analog: a mature consumer-facing large-cap tech company that attempted a poorly received large acquisition as growth stalled, then changed executives. Growth is likely to decelerate further amid pricing pressure, buybacks won't matter much in the short term, and more talent will leave once a CEO is picked. The stock is only optically cheap. x.com  x.com 

Adobe trades at 2018 price levels even though revenue has grown nearly 200% since then, from $2.2B to $6.4B, and its $25B buyback on a $100B market cap amounts to a quarter of the company. The bottom may not be in yet, but the market won't ignore it forever. x.com 

Adobe's record 12.72% free cash flow yield shows it is cheap, but not yet that the selling is over. That yield, more than triple its norm, signals the market expects AI to shrink its cash flows over the coming years. Forward earnings have more than doubled in five years while the forward P/E fell from about 50x to 15x. A cheap stock can stay cheap; it takes a few quarters of steady revenue and growing cash flow to prove the AI fear wrong, with buybacks gaining power the longer it stays low. … Show more