Core Viewpoint - Adobe Systems has experienced a decline of approximately 3.3% in share price over the past month, underperforming the S&P 500 index [1][2] Financial Performance - Adobe reported Q4 fiscal 2025 non-GAAP earnings of $5.50 per share, exceeding estimates by 2.04% and reflecting a year-over-year increase of 14.3% [3] - Total revenues reached $6.194 billion, surpassing consensus estimates by 1.5% and showing a year-over-year growth of 10.5% [4] - Annualized recurring revenues (ARR) at the end of Q4 fiscal 2025 were $25.66 billion, indicating an 11.5% growth from the previous year [4] Revenue Breakdown - Subscription revenues constituted $5.989 billion, accounting for 96.7% of total revenues, with an 11.6% year-over-year increase [5] - Digital Media segment revenues were $4.62 billion, up 11% year over year, with an ARR of $19.2 billion [6] - Digital Experience revenues increased to $1.52 billion, reflecting a 9% year-over-year growth [7] Operating Metrics - Adobe's Q4 GAAP gross margin was 90.4%, expanding by 10 basis points year over year [9] - Operating expenses rose to $2.78 billion, up 12.6% year over year, representing 44.8% of total revenues [9] Balance Sheet and Cash Flow - As of November 28, 2025, cash and short-term investments totaled $6.6 billion, an increase from $5.94 billion [10] - Cash generated from operations was $3.16 billion in the reported quarter, compared to $2.2 billion in the previous quarter [10] Future Guidance - For Q1 fiscal 2026, Adobe anticipates total revenues between $6.25 billion and $6.30 billion, with non-GAAP earnings expected between $5.85 and $5.90 per share [12] - For fiscal 2025, total revenues are projected to be between $25.9 billion and $26.1 billion, with non-GAAP earnings expected between $23.30 and $23.50 per share [13] Market Sentiment - Recent estimates for Adobe have shown an upward trend, indicating positive investor sentiment [14] - Adobe currently holds a Zacks Rank 3 (Hold), suggesting an expectation of in-line returns in the coming months [16]

Core Viewpoint - Value stocks are currently overlooked in the market, with a potential rotation back into undervalued stocks expected in the coming months [1] Group 1: Investment Opportunities - Investors can utilize a screening process focusing on high returns on capital and strong business models to identify undervalued stocks [2] - Ulta Beauty, Adobe, and Sprouts Farmers Market are highlighted as stocks with favorable profiles, positioned in low-cyclical spaces and offering asymmetric upside opportunities [3][4] - Ulta Beauty's stock is trading near its 52-week high, yet its forward P/E ratio of 19.7x indicates it remains undervalued compared to historical levels [3][4] Group 2: Company Fundamentals - Ulta Beauty has not been this undervalued since the onset of the COVID-19 pandemic, with strong fundamentals supporting its business [4] - The company enjoys a gross profit margin of 42.7%, which is indicative of its pricing power and profitability [5] - Ulta's return on invested capital (ROIC) stands at 26.8%, aligning with long-term stock price performance expectations [6] Group 3: Analyst Ratings and Price Targets - Analyst Michael Baker from DA Davidson has reiterated a Buy rating on Ulta with a price target of $550, suggesting a 16% upside from current levels [7] - Adobe's forward P/E of 17.1x is the lowest on record, indicating a potential for significant upside as the economic landscape improves [8][10] - Gil Luria from DA Davidson has placed a Buy rating on Adobe with a price target of $500, representing a 34% upside potential [11] Group 4: Sprouts Farmers Market - Sprouts Farmers Market has seen a 100% rally over the past year but still holds potential for further growth due to its defensive business model [13] - The company boasts a 15% ROIC, positioning it favorably among peers and justifying its premium valuation of 30.8x forward P/E [14][15]