Creative software specialist Adobe (Nasdaq: ADBE) has seen its stock quadruple in value over the past five years, with the company benefiting from many of the tailwinds driving the economy. The rise of software as a service, the gig economy, and increased use of digital design, digital media and digital marketing are all reasons that the total addressable market is essentially unlimited for its products, which include Photoshop, Illustrator and Lightroom.
Adobe caters to the largest corporations, creative college students and everyone in between. It’s incredibly efficient as well, with operating margin at 28% and its relatively low debt of $4.1 billion almost entirely offset by over $3.6 billion in liquid assets. In the company’s recent third quarter, it reported record revenue of $2.83 billion, up 24% year over year, with net income rising 19%.
Seven years ago, CEO Shantanu Narayen repackaged Adobe’s products into an all-encompassing suite called Adobe Creative Cloud, now the industry standard for graphic design. Millions of subscribers pay $80 a month or $360 per year, and Adobe estimates that by 2022, its addressable market could rise to 45 million potential users.
Adobe shares may not be a screaming bargain today, but they still stand a good chance of rewarding long-term investors. At least keep them on your radar in case they drop in value. (The Motley Fool has recommended Adobe.)