Adobe is a buy; fundamentals (revenue/FCF) are strong despite AI concerns, supported by high margins and low valuation multiples.

I received a message that day on LinkedIn from someone who said he was in a university investment group, and everyone thought Adobe was a bad company and would go to zero, while he thought the opposite.

I said, "Listen, Adobe is still capable of reaching zero."

Guys, the fifth arrow is Adobe, the maker of Photoshop, Premiere, and the creative design tools that designers use every day. Once you build your business around Adobe, you'll continue to pay that monthly subscription for years to come.

The cost of switching to an alternative is enormous. The stock continues to suffer a decline due to concerns that artificial intelligence will wipe it out. But look at the true nature of the work.

Guys, I want to remind everyone that, as of the time of preparing this video, Adobe still has an agreement with Cloud and ChatGPT to integrate its products into those services.

So, when I hear that artificial intelligence will replace Adobe, I sit and laugh, saying, "So, Adobe will replace Adobe." I don't think many people realize that Cloud and ChatGPT have an agreement with Adobe.

When I told people that, their response was: "Oh, really?" It seems that people do not understand that . That's okay. This is what gives the investor an opportunity.

So, what is the argument for the stock's growth ( upward expectations)? Record sales of 6.76 billion, up 13%, and record cash flow of 2.52 billion, and they also repurchased nearly 10 million shares.

Do you see a consistent pattern in the struggling companies you have bought?

So, what is the argument for a stock price decline (downward expectations) ? Well, the stock is still falling after the earnings announcement due to concerns about converting free users into paid subscribers.

Also, a new CEO, Anil Chakravarthy—I hope I pronounced the name correctly—will take over on December 1, and there have been many changes in the executive team. Guys, this is a company that people are saying is on its way out .

Guys, this is a company that people are saying is on its way out.

Let me first show you their revenues. This is our revenue chart . This is when artificial intelligence began to spread rapidly. Good. Let's move on to quarterly performance . This is when artificial intelligence began to spread rapidly.

He continues to advance with full force. These are the actual revenues that are generated. Well, perhaps revenue isn't the problem. Free cash flow is probably at the heart of the matter.

This is their free cash flow. This is their quarterly free cash flow. For a while, it seemed as though it was slipping away after artificial intelligence , but it has come back strong.

Why ? Things I love. High returns on capital. Gross profit margin 90%. For every dollar they bring in, 90 cents of it is profit. Look at this net profit margin . They don't grow much because they spend a lot of money to maintain their businesses, and I like that about them .

They will continue to be aggressive. The topic of artificial intelligence has been ongoing for more than 3 years, yet

For a while, it seemed as though it was slipping away after artificial intelligence, but it has come back strong. They don't grow much because they spend a lot of money to maintain their businesses, and I like that about them.

The topic of artificial intelligence has been ongoing for more than 3 years, yet their revenue growth rate over the past three years is 11% annually. When I first bought it as part of my contest in January 2025, the price was $425 per share. The price is now 237, down 45%.

The same company, but actually a better company than it was before. Share buyback. Revenue growth, profit growth, free cash flow growth, very low debt. 10.3 billion in free cash flow versus 7.2 billion in net income.

They are selling at nine times their free cash flow. Unbelievable.

Earnings are expected to grow from $24 per share to $35 per share over the next four years. And what about the revenues of this dying company? Growth of 9%, 9%, 9%, and 8.5%.

But if artificial intelligence has really been the big thing over the past three or four years and their revenues are still rising, is that an indicator? We don't see revenues declining like this.

We still see revenues trending this way. Is this an indication that the company is dying because of artificial intelligence?

I set 4, 7 and 10% for revenue growth. I set the free cash flow, which is higher. They put 35, 38 and 41. Keep in mind that they have achieved above 38 over the past ten years.

Therefore, I am conservative even in my middle assumptions.

Their return on capital continues to improve. They were only given a slight premium over the market. 16, 19 and 22. And of course, my 9.5 percent return.

The stock price is currently 237. I have a low price of 360 based on the free cash flow multiple, a maximum of 830, and an average of 550. Even in terms of profits, which are always lower, I have a range of 250 to 565 with 376 on average.