Adobe specialises in software for creators. Be it animation, photography, graphs, video, motion pictures, you name it. Adobe used to sell its software using a CD installation method. But that was too old-school. And its leadership recognised the need to switch to something very much more predictable and profitable – the subscription model via what it calls the Creative Cloud.

If you are a creator of content, you will know by now how big this 10 ton gorilla is in the world of content creation. It is a HUGE success!

Currently, an individual subscription for companies can cost around USD40 a month to enjoy all the software content, whereas in the past, Photoshop would cost $699 for perpetual usage. Today, upgrades come through the cloud with your cloud subscription license.

Let’s see how it has grown since then. The graphs below provide a powerful imagery of a 10 ton gorilla that can go to 20 tons if it continues this steady climb in a winner-takes-all realm.

Here is its stellar growth in revenue alone. 

There are many similar companies that use this model. Your telco provider is on subscription. Your NetFlix is a subscription-only business. How about your gym membership? Microsoft (yes, oh gosh!)? They keep the "drug of usage" on tap and the ones who pay are the subscribers themselves.  

Things to note as an investor

As an investor, in addition to knowing that a company makes profits or has good revenue, you want to know a few things.

1. What is the growth like for revenue & profits?
2. What is its free cash flow like? Is it consistent?
3. What is the vision for the company in growing and does it have additional streams of revenue it can create once it has attained a certain dominance in the industry?
4. What is its price to earnings? How does that compare with the rest of the industry? 
5. What is its price to sales in comparison? 
6. How about its Return on Equity? 

For Adobe, let's do some homework here shall we? Use this link provided here to fill in the blanks above and take a look at where this will land for the stock:

https://finance.yahoo.com/quote/ADBE

Remember: the key is this – FOLLOW THE MONEY and you will do well!

Yours,

Chief Editor

BBA Market Perspectives

This does not constitute investment advice. Do your own due diligence before investing! 

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