u/EmotionalCupcake3303 ·
Reddit — r/ValueInvesting
· July 29, 2026 at 18:03
· ⬆ 15 pts
· 💬 33 comments
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AI Summary
Summary
The post argues that Adobe (ADBE) is fairly valued at current prices (~$267), not cheap, using a simple DCF model.
The author believes AI will not disrupt Adobe’s business due to strong vertical integration and legacy lock-in, but revenue growth assumptions (8.5% for 10 years) may be generous.
Quality assessment: Reasonably well-researched DD with clear DCF assumptions, but relies on subjective growth/margin estimates; not speculative, but not a strong buy or sell call.
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Comments33
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Adobe is probably the face of the SAAS apocalypse. Can't think of many software companies that are as big and lost as much from their all time highs. The narrative that AI is to blame, to me, doesn't make too much sense. Imo the price was simply too high to begin with.
Doing a simple DCF proves the point:
\-In the last few years Adobe revenues grew by around 10% per year. We can therefore estimate for the next 10 years a lower yearly revenue growth of about 8.5% (which is generous). That leads to a revenue of about 52.2 B$ per year 10 years from now.
\-opearting margin has been more or less stable at around 34% so we can assume it will stay the same
\-the return rate/discount rate should be of at least 10% since you are taking a risk by investing in a single stock. The return should therefore be higher than the market average.
\-terminal growth and market rate are both estimated at 2% a year
with these assumptions I get a fair value price of **267.43$** which is about the same of the current market price as of 29.07.2026 after the recent rise.
calculation source: [https://www.insicard.com/community/dcf/6a67bfcba362f645907f87d8](https://www.insicard.com/community/dcf/6a67bfcba362f645907f87d8)
These DCF parameters assume that Adobe will remain the market leader (which I think is the case) and that AI will not demolish its business model (which I also think is the case).
The main point I have to defend this thesis is that Adobe has a very strong vertical integration in its customers. It's legacy software with all sorts of integrations and market effects. I don't think that slighly stronger LLMS will be able to replicate for cheaper what Adobe has created in the last decades. It's a bit like saying companies will stop to use microsoft office because now there is AI that can make it better and cheaper. Recent evidence shows that AI development, especially for big software projects, has severe problems both in terms of token costs, reliability and maintainability of the code base.
With current AI tech stack and its likely evolution over the next years I don't see Adobe suite being rebuilt wtih vibe coding and deployed in all major fortune 500 customers.