Vladyslav Koptiev @AtlasCapital: "Publishing my DCF model for..."

Malta

Edited

Publishing my DCF model for $ADBE (Adobe Systems Inc) for the first time. Base case scenario suggests that the stock is trading at 17% discount to fair value. If adjusted to FV within 3 years, it will generate an annual alpha ~ 6%. 𝗞𝗲𝘆 𝗮𝘀𝘀𝘂𝗺𝗽𝘁𝗶𝗼𝗻𝘀: 1) Explicit 5Y growth @ 8%. Most analysts suggest 10% growth or higher, but I prefer to be conservative. You can call me a sandbagger. Alternatively, you can use my bull case scenario, which can better reflect your optimism. 2) Long-term growth in perpetuity @ 3% (long-term GDP growth for developed economies) 3) WACC @ 8.7% 4) An EBITDA exit multiple of 15.1 which I believe will reflect ADBE mature stage in 10 years from now. 5) Industry average Sales /Capital at 1.79 to find out the reinvestment required. 𝗛𝗶𝘀𝘁𝗼𝗿𝗶𝗰 𝗚𝗿𝗼𝘄𝘁𝗵 (𝗳𝗼𝗿 𝗰𝗼𝗻𝘁𝗲𝘅𝘁) Over the past decade, Adobe’s growth has been strong but clearly decelerating: revenues expanded at nearly 19% CAGR from 2015 to 2024, powered by the shift to SaaS subscriptions, but more recently have slowed to around 10–12% annually. EBITDA followed a similar pattern—growing rapidly through 2021 with double-digit gains, but in the past few years rising only modestly (just ~1% in FY 2024), as margin expansion has stalled due to higher costs and investments in AI and innovation. In short, Adobe has transitioned from a high-growth phase into a more mature, steady compounder with durable double-digit top-line growth, but more constrained EBITDA leverage. 𝗪𝗵𝘆 𝗜 𝗯𝗲𝗹𝗶𝗲𝘃𝗲 𝗶𝘁 𝗰𝗮𝗻 𝘄𝗼𝗿𝗸 𝗼𝘂𝘁 𝘄𝗲𝗹𝗹 ● Durable Competitive Moat ● Financial Strength & Margins. Gross margins >85% and strong free cash flow conversion. Adobe demonstrated impressive historical improvement in ROIC, and investors do appreciate high growth and improving ROIC. This gives me confidence that price will catch up to the intrinsic value sooner, rather than later. ● Recurring Revenue Base ● Secular Growth Drivers ● AI Upside (Firefly, Sensei, Generative Tools) ● Attractive Relative Valuation 𝗪𝗵𝗮𝘁 𝗰𝗮𝗻 𝗴𝗼 𝘄𝗿𝗼𝗻𝗴 ● Growth Deceleration Beyond Expectations ● AI Disruption Risk ● Execution Risk in AI Monetization ● Competitive Pressure in Enterprise (Experience Cloud) ● Regulatory and Antitrust Risks ● Margin Pressure ● Macro & Market Risks 𝗦𝗲𝗻𝘀𝗶𝘁𝗶𝘃𝗶𝘁𝘆 You can choose your own assumptions from the attachments below: Base case + Bear case + Bull case and Sensitivity table 𝗜𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁 𝗻𝗼𝘁𝗲: figures are based on June reporting. This is because my tool uses data from Edgar website, where the most recent quarter was not available yet. Once updated figures are available, I plan to update the model and reshare here. The intrinsic value will be even higher once updated figures are populated. 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻: ADBE can be a decent trade, but the discount is not extremely appealing. Will keep it 2% of total portfolio for now (outside Etoro) and use any further decline to buy more. $SPX500 $QQQ (Invesco QQQ) $BTC $VGT (Vanguard Information Technology)

5 Mentioned

ADBE

Adobe Systems Inc

SPX500

QQQ

Invesco QQQ

BTC

Bitcoin

VGT

Vanguard Information Technology

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