Parkev Tatevosian, CFA on $ADBE (Nov 4, 2026)

One of the steps Adobe has taken to counter the growing risks of artificial intelligence and competition from other companies in its field is to shift towards a "freemium" business model .

This model has already begun to achieve early and tangible successes.

To put things in perspective, the number of active monthly users of Adobe's free services has exceeded 100 million , an increase of 70% compared to the same period last year. These are the growth rates that investors would like to see from Adobe to allay some concerns about the growing threat of artificial intelligence.

But does this make Adobe stock a buying opportunity, or should investors avoid it because of the threats posed by artificial intelligence? Well, one factor to consider is Adobe's earnings per share estimates from Wall Street analysts who follow the company.

These analysts have become more optimistic about Adobe.

Earlier this year, they were estimating Adobe's earnings per share to grow by about 13% over the next few years. These estimates have been revised upwards to approximately 14%.

Therefore, the number itself is not the most important thing. That's just a 92 basis point increase compared to the start of the year. But what encouraged me was the general trend.

The trend was not downward. This is what I would like to see from Adobe, because we must remember that this stock is not trading at a high valuation.

In fact, it's quite the opposite. This stock is trading at a very large discount. The stock's valuation anticipates a slowdown in business and a slowdown in profits in the future.

And that the company slowly transitions into the category of very slow growth or no growth.

The reason I say that is to look at the rating. Based on a forward price-to-earnings ratio, Adobe stock is trading at only 9.1. This is equivalent to one-third of the valuation at which the stock was trading just two years ago.

This is equivalent to one-third of the average share price in the S&P 500 index.

However, the company continues to achieve double-digit revenue growth. It still has a strong business model with a very well-established customer base.

But of course, it also has one of the biggest risk factors among all the companies I follow. This is because the increasing effectiveness of artificial intelligence threatens its business model and its customer base.

Now , one of the company's competitive advantages is the high cost of customers switching to other alternatives. It is difficult and time-consuming for its existing customer base to switch to other providers of similar services that use artificial intelligence and perhaps at a lower cost.

Today, I also reviewed my discounted cash flow model for Adobe. I adjusted my estimate to be slightly higher than it was the last time I evaluated the company. The fair value estimate I arrived at is $360 per share.

Remember that the way I arrive at these calculations is by estimating the amount of free cash flow that I believe the company will generate from today and into the very distant future.

I then discount all those cash flows to the present using the weighted average cost of capital , which for Adobe is 13.14%. The reason I discount all those cash flows is that money in the future is worth less to me than the money in my pocket today.

If I had money in my pocket today, I could put it into a very secure money market account and it would earn me 4%. Therefore, I will discount future cash flows by at least 4%. Furthermore, the money promised in the future is not guaranteed to reach my pocket.

There are many things that could happen and prevent that expected money from reaching my pocket. Therefore, a risk factor is added in addition to the time value of money, opportunity cost , etc. And so I arrive at the weighted average cost of capital.

Therefore, at $360, Adobe's fair value estimate is significantly higher than the current market price of $251. Undervalued by at least 40%, according to my estimates.

So, to answer the question, do I think Adobe stock is still a buying opportunity? I think so. In fact, I ranked it as one of the best stocks you can buy right now. Of course, I remind everyone that the risks are definitely high, but I like the risk-to-reward ratio at current market prices.