Lack Of Serious Competition Will Allow Adobe To Fly Higher This Year

Adobe Stock Prediction

Summary:

Adobe had a very good year in 2016.

I expect it to have another strong performance in 2017.

Lack of serious competition to the Creative Cloud suite of web, print, and graphic design software allows Adobe to remain ultra-dominant.

The short and long-term algorithmic forecasts of Adobe are all positive.

Adobe’s (ADBE) stock already posted a Year-to-Date (YTD) gain of more than 9%. However, I expect this software subscription leader’s stock to go higher. Maybe even beat its old 52-week high of $114.57 by end of April 2017, after it does its next quarterly earnings report.

Moat-focused investors should really add ADBE to their portfolio. Adobe’s high gross margin of 84% shows its products have a captured audience and negligible competition. There are dozens of free or cheap alternatives to Photoshop and yet that software remains a golden goose for Adobe.

(Source:Vuru)

Adobe’s core software subscription business is unlikely to ever be threatened. Autodesk (ADSK) and Corel Corporation are still unable to offer any decent competition to Adobe’s Creative Cloud suite of software products. Bohemian Software and Serif both have decent alternatives to Adobe Photoshop and Illustrator. However, those two firms are too small to offer any serious threat to Adobe’s products.

As long as majority of photographers and designers are dependent on Photoshop and Lightroom CC, Adobe can keep on posting record revenue and net income for the next five years.

Adobe’s record revenue of $5.85 billion (up 22 Y-o-Y) in Fiscal Year 2016 was largely due to the $4.01 billion Annualized Recurring Revenue (ARR) from Digital Media Creative Cloud subscriptions. Lack of competition helps Adobe generate strong income. Adobe netted $1.17 billion (up 85% Y-o-Y) in FY 2016.

I also estimate that there are now more than 9 million paying subscribers of Creative Cloud subscribers. There were 8 million paid subscribers in September. Christmas bonuses and 13^th month pay of photographers, animators, graphic artists, and UI/UX designers likely greatly boosted Q4’s annual Creative Cloud subscriptions.