The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

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 13th month pay of photographers, animators, graphic artists, and UI/UX designers likely greatly boosted Q4’s annual Creative Cloud subscriptions.

For FY 2017, I expect Adobe’s Creative Cloud to deliver $5.0 billion in ARR. The total revenue could hit $7.3 billion, net income will be $1.4 billion. My forecasts are based on the recent 3-year trend of Adobe’s double-digit growth in revenue and net income. A 20% rise in net income could consequently propel ADBE’s price to $120-$125.

Another excellent reason to go long on Adobe is its rock solid financial status. It also has more than $4.7 billion in cash that Adobe could use to diversify its business. I expect Adobe to intensify its Marketing Cloud business segment to increase its presence in the $150 billion internet advertising industry.

(Source: Vuru)

Graphic designers who create TV, web, and mobile advertisements use Adobe software. It only makes sense therefore for Adobe to become a serious advertising/marketing service provider. Microsoft (MSFT) recently hired Adobe last year to be its premier marketing partner.

The strong cash flow from Adobe’s Creative Cloud could generate enough money to grow the Marketing Cloud division. Gartner has consistently ranked Adobe as the leader in digital marketing hubs for the past two years.

This should inspire Salesforce (CRM) or Oracle (ORCL) to eventually make an acquisition offer for Adobe. Adobe can solidify the product portfolio of SaaS leaders like Sales, Microsoft, and Oracle. A leaked email revealed that Adobe is on the list of acquisition targets of Salesforce last year.

Conclusion

Adobe’s inimitable, killer advantage over its rivals is that for the last two decades, employers only hire designers and creative professionals who are well-versed in Adobe Photoshop, Illustrator, Premiere, After Effects, InDesign, and Dreamweaver. Consequently, colleges, universities, vocational, and skills training institutes only offer Adobe-related software training and education.

Go to any online job sites and you won’t see any postings for CorelDraw-trained graphic designers. You won’t see professional photographers also editing their images using Autodesk’s Pixlr software. Investors should therefore add as much ADBE shares as they could now. I expect this stock to hit $125 by the end of this year.

My bull thesis for Adobe is also supported by the positive short and long term algorithmic forecasts from I Know First.

Technical indicators and moving averages are also hinting ADBE is a good stock to buy now.

(Source: Investing.com)

I Know First Past Success With ADBE

I Know first’s self-learning algorithm had forecasted a bullish signal on ADBE last year on January 29th, 2016. On January 31t, 2016, I Know First had published the performance of the algorithmic prediction. ADBE shares have risen 34.76%, in accordance with the bullish forecast.