Adobe Inc. (NASDAQ:ADBE) is one of the best cheap stocks to buy for 2026. On January 27, Adobe Inc.’s (NASDAQ:ADBE) board-level Executive Compensation Committee approved three linked initiatives governing how senior leaders will be paid over the coming years. One was a three-year Performance Share Program rewarding stock performance and sales growth, and the other was an annual cash bonus plan tied to revenue and profit targets. The last initiative was a new policy capping severance payments, and all are e ...

Core Insights - The U.S. stock market experienced mixed performance with major indexes reflecting cautious investor sentiment ahead of significant economic announcements and the continuation of Q4 earnings season [1] Major Index Performance - The Dow Jones Industrial Average (DJI) closed down by 249.76 points at 49,134.25 - The S&P 500 (SPX) rose by 13.30 points to close at 6,926.65, on track for its first back-to-back weekly drop since June - The Nasdaq Composite (IXIC) increased by 137.87 points to 23,573.89 - The CBOE Volatility Index (VIX) decreased, indicating a slight easing of market stress [2] Upcoming Market Events - The Federal Open Market Committee (FOMC) meeting on January 29 is a key focus, with expectations that interest rates will remain in the 3.50-3.75% range - Investors will be attentive to Fed Chair Jerome Powell's comments on future monetary policy, labor market conditions, and inflation risks [3][4] Q4 Earnings Season - The upcoming week will see earnings reports from major tech companies including Apple, Microsoft, Alphabet, Amazon, Meta Platforms, and Tesla - These companies have underperformed the S&P 500 over the past year, making their earnings particularly crucial for market sentiment [5] Major Stock News - Intel (INTC) shares dropped by 17% in pre-market trading after a Q4 earnings report that, while beating estimates, included a weaker-than-expected Q1 outlook - Nvidia (NVDA) shares rose by 1.4% due to reports of Chinese regulators allowing orders for its H200 AI chips, with Q3 earnings up 62% year-over-year to $57 billion [7][8] - Tesla (TSLA) discontinued its basic driver-assistance system, Autopilot, in the U.S. and Canada - Capital One Financial (COF) shares fell after missing earnings estimates and announcing an acquisition of fintech startup Brex for $5.15 billion [9][10] Broader Market Trends - Commodities showed continued strength, with gold futures reaching $4,970 an ounce and silver surpassing $100 an ounce - Crude oil futures traded above $60 a barrel, reflecting ongoing investor sentiment and geopolitical considerations - U.S. consumer sentiment reached a five-month high, providing support for the economy [13]

Group 1: Market Performance - Technology sector maintained dominance in 2025, with a positive outlook for 2026 driven by AI trends [1] - Adobe (ADBE) and Salesforce (CRM) experienced declines of approximately 20% in 2025 despite strong overall market performance [1][6] Group 2: Adobe (ADBE) Insights - Adobe reported double-digit growth in Q4, driven by strong demand for AI-driven tools and a focus on cloud delivery [2][3] - The company has achieved nine consecutive quarters of double-digit year-over-year sales growth, indicating strong product appeal [4] - ADBE's valuation is attractive, with a forward earnings multiple of 14.2X, reflecting a nearly 40% discount compared to the S&P 500 [8] Group 3: Salesforce (CRM) Insights - Salesforce, a leading AI-powered CRM platform, raised its FY26 sales guidance, forecasting a 9.5% year-over-year sales growth [9][12] - The company reported a 12% year-over-year increase in remaining performance obligations (RPO) to $59.5 billion, indicating strong demand [10] - Operating cash flow grew 17% year-over-year to $2.3 billion, with significant shareholder returns through share repurchases and dividends [11] Group 4: Future Outlook - Both Adobe and Salesforce are positioned for potential rebounds in 2026, supported by recent quarterly results and ongoing AI demand [13] - The companies' product stickiness makes it challenging for customers to switch, enhancing their market positions [6][10] - The technology sector's focus on AI will continue to dominate headlines, benefiting both companies [13]

Group 1 - Adobe Inc. ranks among the best AI stocks to buy, with Piper Sandler reaffirming its Overweight rating and $470 price target following the company's fiscal year 2025 results [1] - The company reported a revenue beat of $94 million, surpassing the previous four-quarter average record of $77 million [1] - Adobe anticipates fiscal first-quarter revenue between $6.25 billion and $6.3 billion, exceeding Wall Street projections of $6.23 billion [2] Group 2 - For the full fiscal year, Adobe expects revenue to be around $25.9 billion to $26.1 billion, slightly above analysts' projections of $25.89 billion [2] - The company is targeting a record $2.6 billion in net new Digital Media ARR for fiscal year 2026 [3] - Adobe's AI operations have gained significant traction, with AI credit consumption increasing threefold quarter-over-quarter, and AI-influenced annual recurring revenue exceeding $8 billion [3] Group 3 - Adobe specializes in creating, publishing, and promoting digital content, offering tools like Photoshop, Illustrator, Acrobat, and Premiere Pro, often bundled in the Adobe Creative Cloud subscription [4]

Core Viewpoint - Adobe Inc. is recognized as a strong investment opportunity by hedge funds, despite recent price target reductions by analysts, due to solid revenue growth and a positive long-term outlook [1][4]. Financial Performance - Adobe achieved record quarterly revenue of $6.19 billion in Q4 of fiscal 2025, marking a 10% year-over-year increase [2]. - For the full fiscal year 2025, Adobe reported total revenue of $23.77 billion, an 11% increase year-over-year [2]. - The company's annualized recurring revenue reached $25.20 billion, reflecting an 11.5% year-over-year growth [2]. Analyst Ratings and Outlook - BMO Capital lowered its price target for Adobe to $400 from $405 but maintained an Outperform rating, citing strong Q4 and fiscal 2025 results [1]. - Analysts expect Adobe's EPS for fiscal year 2026 to be $22.7, with growth anticipated in both new and total annual recurring revenue compared to fiscal 2025 [3]. - Bernstein also reiterated an Outperform rating while adjusting their price target to $506 from $508, indicating expectations of double-digit growth in 2026 [4]. Company Overview - Adobe Inc. is a global software company known for its Creative Cloud suite, which includes popular applications like Photoshop, Illustrator, Premiere Pro, and Acrobat [4].

Core Insights - Adobe's fourth-quarter fiscal 2025 results are anticipated to show increased Digital Media revenues, with expectations set between $4.53 billion and $4.56 billion [1][9] - The Digital Experience segment is projected to generate revenues of $1.495 billion to $1.515 billion, with subscription revenues estimated between $1.395 billion and $1.410 billion [1] Digital Media Revenue Expectations - The Zacks Consensus Estimate for Adobe's Digital Media revenues stands at $4.41 billion, reflecting an 8.2% year-over-year growth [2] - The Digital Experience revenues are expected to reach $1.402 billion, indicating a 10.8% year-over-year increase [2] AI Influence on Revenue Growth - Strong demand for AI-infused products, such as Creative Cloud Pro and Acrobat, is expected to significantly boost Digital Media revenues [4] - The monetization of Acrobat offerings, including the AI assistant and Acrobat Studio, is contributing to revenue growth [5] Competitive Landscape - Adobe's AI business remains small compared to competitors like Microsoft, Alphabet, and Salesforce, which have seen substantial growth in their AI services [6] - Over the past year, Adobe shares have declined by 38.1%, while Microsoft and Alphabet shares have increased by 10.1% and 78.9%, respectively [7] Current Market Position - Adobe holds a Zacks Rank of 2 (Buy), indicating a favorable outlook in the market [8]

Group 1 - Adobe Inc. is viewed positively by analysts, with a 12-month average price target indicating over 42% upside potential from current levels ahead of its fiscal Q4 2025 earnings release on December 10 [1] - Analysts from Barclays and D.A. Davidson have reiterated Buy ratings on Adobe, with price targets of $465 and $500 respectively [2] - During the fiscal Q3 2025 earnings release, Adobe raised its Q4 2025 revenue outlook to between $6.075 billion and $6.125 billion, and GAAP EPS guidance to a range of $4.27 to $4.32. Full-year revenue guidance was also increased to between $23.65 billion and $23.70 billion, with GAAP EPS raised to a range of $16.53 to $16.58 [3] Group 2 - Adobe announced the acquisition of Semrush for $1.9 billion, marking its first M&A activity since the termination of the Figma deal in December 2023. This acquisition is expected to enhance Adobe's existing solutions by integrating Semrush's GEO and SEO capabilities [4] - Adobe specializes in software for creating, publishing, and promoting digital content, offering tools like Photoshop, Illustrator, Acrobat, and Premiere Pro, often bundled in the Adobe Creative Cloud subscription [5]

Core Viewpoint - Both Adobe and Salesforce have lost favor on Wall Street, yet their fundamentals continue to strengthen, presenting a potential investment opportunity or indicating a decline not yet reflected in financial data [1] Company Overview - Adobe is set to release its Q4 FY2025 earnings report on December 10, which will provide insights into its performance and future expectations [1] - The company has transitioned to a subscription-based model, with nearly 97% of its revenue coming from subscriptions [1] - Adobe's operations are divided into three main segments: Digital Media (approximately 74% of total revenue), Digital Experience (25%), and Publishing & Advertising (1%) [1] Financial Performance - For FY2024, Adobe reported a revenue of $21.5 billion and aims for a target of at least $23.65 billion for FY2025 [2] - The company anticipates its first quarter revenue to exceed $6 billion, with a projected net profit margin over 30% and an EPS range of $16.53 to $16.58 [2] - Adobe's revenue guidance has been consistently raised throughout the year, indicating strong growth prospects [5] Growth Metrics - Adobe's core financial indicators have shown steady improvement over the past decade, with no signs of adverse impacts from AI on its business [6] - From FY2021 to FY2024, Adobe's product revenue has grown at an average annual rate of at least 12%, with Document Cloud experiencing a compound annual growth rate of 23% [6] Market Perception and AI Integration - Concerns about AI negatively impacting Adobe's business appear exaggerated, as the management emphasizes that AI presents significant growth opportunities [9][10] - Adobe is integrating AI deeply into its core products, enhancing user experience and maintaining high-quality tools for professional users [10] - The company has reported that over $5 billion of its annual revenue is driven by AI technology, up from an estimated $3.5 billion a year ago [12] Customer Retention and Ecosystem - Adobe has not experienced user attrition; instead, customer retention rates are improving, driven by the integration of AI into its products [12] - The introduction of intelligent workflows has increased user engagement within Adobe's ecosystem, with 70% of eligible customers utilizing the AI assistant feature [11] Valuation and Stock Buyback - Adobe's current P/E ratio stands at 20, with a forward PEG ratio of 1.16, indicating a potentially undervalued position in the tech sector [12] - The company has been actively repurchasing shares, with a total buyback of nearly $12 billion over the past four quarters, reflecting confidence in its valuation [14] Future Outlook - If Adobe maintains a 12% net profit growth rate, its forward P/E could decrease to 14.9 by 2026, suggesting a valuation more typical of industrial firms despite its tech giant profitability [13] - Analysts believe that Adobe's narrative may shift positively, similar to Google's recent market performance, potentially leading to significant returns for investors [16][17]

Core Viewpoint - Both Adobe and Salesforce have lost favor on Wall Street, yet their fundamentals continue to strengthen, presenting a dilemma: they could either be the most attractive stocks in the software sector or companies in decline whose downturn has not yet reflected in financial data [1]. Adobe Financial Performance - Adobe is set to release its Q4 FY2025 earnings report on December 10, which will provide insights into its performance for the fiscal year and expectations for the next fiscal year [3]. - The company's success over the past decade is attributed to its transition to a subscription-based business model, with nearly 97% of revenue coming from subscriptions. The revenue breakdown includes approximately 74% from digital media, 25% from digital experience, and 1% from publishing and advertising [4]. - For FY2024, Adobe's revenue target is set at no less than $23.65 billion, with expectations of quarterly revenue surpassing $6 billion for the first time [4][7]. - The projected net profit margin for the current fiscal year is expected to exceed 30%, with earnings per share (EPS) estimated between $16.53 and $16.58, leading to a trailing P/E ratio of approximately 20.5 [4][7]. Revenue Guidance and Growth - Adobe's revenue guidance has been consistently raised throughout the year, with the latest targets exceeding earlier projections made in March [8]. - Over the past decade, Adobe's core financial metrics have shown steady improvement, with no signs of adverse impacts from AI on its business. The average annual revenue growth rate for its products from 2021 to 2024 is projected to be no less than 12%, with Document Cloud experiencing a compound annual growth rate of 23% [8]. AI Integration and Market Perception - Concerns about AI disrupting Adobe's business model may be overstated, as the management has emphasized that AI presents significant growth opportunities [10]. - Adobe's professional user base requires high-quality tools, and while AI can enhance content production efficiency, it also increases the demand for post-processing, which could drive growth for Adobe [10][11]. - The integration of AI into Adobe's core products, such as Photoshop and Illustrator, is being executed through Adobe Firefly, which uses authorized datasets to mitigate legal risks [11]. - The adoption of AI features has led to a 70% penetration rate among eligible customers using Adobe Experience Platform's AI assistant, indicating that AI is becoming a growth driver rather than a threat [13][14]. Valuation and Stock Buyback - Adobe's current P/E ratio stands at 20, with a forward PEG ratio of 1.16, suggesting it is undervalued compared to typical tech valuations. The forward EV/EBITDA ratio is 12.4, and the forward P/FCF ratio is 15.34 [14]. - If Adobe maintains a 12% net profit growth rate, its forward P/E could drop to 14.9 by 2026, indicating a valuation more typical of industrial companies despite its tech-level profitability [15]. - The company has been actively repurchasing shares, with a total buyback of nearly $12 billion over the past four quarters, reflecting confidence in its undervalued stock [15][16]. Investment Outlook - Analysts view Adobe as an attractive investment opportunity, likely to yield substantial returns in the coming years, as the divergence between market narratives and the company's fundamentals becomes more pronounced [18]. - A comparison is drawn to Google's previous undervaluation, suggesting a similar turnaround could occur for Adobe by 2026 [19].

Core Viewpoint - Adobe's stock is experiencing significant downward pressure, with a year-to-date decline of approximately 27%, raising concerns about its future in the AI landscape despite strong earnings and cash flow [2][8]. Company Overview - Adobe has transitioned from traditional software licensing to a software as a service (SaaS) model, becoming a pioneer in this space [4]. - The company has successfully bundled its applications into a subscription package known as Creative Cloud, which has become a standard in various sectors [5]. Financial Performance - Adobe has achieved all-time-high earnings and free cash flow (FCF), yet its stock price has decreased over the last five years [8]. - The stock is currently trading at 20.4 times earnings and 14 times forward earnings, making it the cheapest it has been in over a decade, significantly below the S&P 500's forward price-to-earnings ratio of 23.6 [14]. Market Sentiment - Investor sentiment is currently negative, focusing on concerns about Adobe's leadership in AI and the potential erosion of its competitive advantages due to generative AI tools [9][10]. - The stock's decline mirrors past sell-offs of companies like Apple and Alphabet, which later rebounded after proving their critics wrong [11][12]. Future Outlook - If Adobe can effectively implement and monetize AI tools, it could lead to a recovery in its stock price, despite potential subscriber losses [13]. - The company has been actively buying back shares, reducing its share count by 12.4% over the last five years, which supports its stock price [15]. - Adobe's balance sheet remains strong, with only $260 million in long-term debt net of cash and equivalents [16]. Earnings Report Expectations - Adobe is set to report earnings on December 10, and investors are advised to look for concrete evidence of how the company is monetizing AI rather than just optimistic statements from management [20].