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 Gainers📈 & Losers📉

Our Biggest Gainers & Losers of the Day in the $100,000 Build Portfolio

For the 12th December 2024:

• From Photoshop to PhotoFlop? 😭

• Save Lives & Profit ❤️‍🩹 

From Photoshop to PhotoFlop? 😭 

A month or two ago I had them down as ballsy creative geniuses. Then they let me down.

Adobe stock took a 13% dive today on the back of earnings. But is it as bad the market’s reaction would have you believe?

THE QUICK SKETCH 🖌️

• Adobe crushed its Q4 numbers. But fiscal 2025 guidance? Yeah… not so much. Revenue growth is pegged at 9% (Wall Street wanted 11%). Operating margins are taking a bit of a haircut, too. ✂️

• Analysts are split on price forecasts for the future

• Big picture? Adobe’s betting hard on generative AI, but Wall Street’s got one question: When will it pay off?

WHY THE DROP? 🚨

It’s not all bad, but it’s definitely not all good.

• 🎯 Hits:

  • Q4 revenue smashed expectations.

  • Digital Media ARR up 11%. Pretty solid, right?

  • Share buybacks doubled to $9.5B in fiscal 2024. (Nothing screams confidence in your operations like a massive buyback.)

  • Firefly (their generative AI tool) is gaining traction. Premium features are set to launch in 2025.

• 🎨 Misses:

  • Fiscal 2025 guidance missed the mark. Revenue projections came in at 9%. Analysts had their hearts set on 11%.

  • ARR growth is slowing. From 13% to 11%. Not awful but definitely not ideal

  • AI monetization is not moving as fast as everyone hoped for, me included. It was a big part of my bull case. It makes me wonder “Is Adobe focusing too much on adoption over profits?“

WHAT ARE THE EXPERTS SAYING 🎤

Analysts are all over the place on this one. Price forecasts don’t know whether they’re coming or going.

• Jefferies: “We still like Adobe long-term.” They kept their $650 target & Buy rating. They pointed out the AI potential & solid Q4 results. Admissions were made that this wasn’t the “Eureka!” moment investors hoped for.

• TD Cowen: Downgraded to Hold, cut their target to $550. They see pricing headwinds, slower growth & some risks tied to Adobe’s go-to-market tweaks.

• Morgan Stanley: Stayed bullish (Overweight, $660 target). They reckon Adobe’s premium tier strategy should bring in serious cash in 2025, but the current slowdown is a buzzkill.

• Evercore: Still riding the Outperform train with a $650 target. They call Adobe a “show me” stock. Basically, investors need proof that Firefly and AI products will deliver.

MY PLAN 🗺️ 

I’m mostly a glass half full kinda of guy.

Firefly’s potential is undeniable & the AI momentum is real. I think todays drop shows a lack of patience more than a lack of potential.

Is it a no brainer all in play? Absolutely not. Is a $600 price target reasonable? I’d say so.

And that would put the position at a 25%+ profit from current price. The downside at current price is very minimal. Things would have to really go tits up badly for $475 to come out at a fair value

Adobe is betting big on AI & we’re in the "wait-and-see" phase right now. Moderate risk, high reward. I’ll take that trade.

A tentative “buy the dip” from me.

Save Lives & Profit ❤️‍🩹 

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That’s all! See you same time tomorrow 👋 

P.S Hit reply & let me know what you thought of today’s newsletter. All feedback is welcomed ❤️