Burry Bets on Adobe
This week marked a big change for the software giant Adobe. Its long-time CEO Shantanu Narayen announced he will step down, alongside solid numbers for the last quarter. Revenue grew +11% last year, with earnings up +14% YoY, quite good results for someone who started the job back in 2007. That’s almost two decades at the top.
During his tenure, Adobe’s revenue grew from about $3B to more than $21B annually, roughly a 7x increase. Narayen transformed Adobe from a traditional boxed-software company into a global cloud and digital-experience platform. The share price rose about +800% over that period, delivering a strong double-digit annual return.
Lately, however, the company has been facing challenges. Competition from tools like Canva and Figma has increased. Adobe even tried to acquire Figma, but regulators in the EU and UK blocked the deal. On top of that, there’s growing AI-related FUD across the software industry.
As a result, the stock has fallen roughly -50% from its highs over the past few years and now trades at a P/E of around 15, low compared to other large software companies like Salesforce or Microsoft, both closer to a P/E of ~24.
Whether this situation presents an anticyclical opportunity remains to be seen. But “The Big Short” investor Michael Burry seems to have an opinion: He announced in early March that he opened a long position in $ADBE.
To sum it up: I think the PDF giant is a company worth watching over the coming months and years. If a new CEO can restore investor confidence, the stock could push toward new all-time highs and potentially outperform the market. If not, it might remain a fallen angel like many others.
What’s your take on Adobe? Are you betting on a comeback? I am not invested since software is not my circle of competence.
