The promise of generative artificial intelligence hasn't been able to keep Adobe (ADBE) stock afloat over the past year, but long-time shareholders are still sitting on market-crushing returns.
After adding 77% in 2023, shares in the maker of application software for creative types lost about 25% last year, lagging the broader market by a whopping 50 percentage points. If it's any consolation to restive shareholders, many steps forward and a few steps back is sort of par for the course for volatile ADBE stock.
Much of the recent volatility can be attributed to Adobe's embrace of generative AI. For years, the company enjoyed a near monopoly in its niche. Its Creative Suite – which includes the likes of Photoshop, Premiere Pro for video editing and Dreamweaver for website design, among others – really had no peer.
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But times change. The emergence of Microsoft's (MSFT) Azure and other cloud-based competitors have taken a bite out of Creative Cloud. Adobe's suite of products still commands a market share of more than 60%, but there's no question the company – and its shareholders – have been feeling the heat.
Just look at how shares have slowed down over the past few years.
Adobe stock has outperformed the S&P 500 by a wide margin over the course of its life as a publicly traded company, generating an all-time total return of 23.4%. By comparison, the broader market returned 10.6% over the same span.
The early 2020s have been a different story entirely. A terrible 2022 and an awful 2024 has ABDE stock trailing the broader market by wide margins over the past one-, three- and five-year periods.
The bottom line on Adobe stock
Adobe's hot 2023 run was a lot more like what longtime shareholders have come to expect from the stock. After all, anyone who plonked down just a thousand bucks into ADBE a couple of decades ago would have enjoyed truly outstanding returns.
Have a look at the chart below and you'll see that a $1,000 investment in Adobe stock 20 years ago would today be worth more than $14,500. The same money invested in the broader market would theoretically have grown to about $7,400.
True, Adobe stock remains about a third below its all-time closing high set back in November 2021, but analysts think it can reclaim those levels eventually.
After all, Wall Street is pretty bullish on the name. Of the 39 analysts issuing opinions on Adobe stock surveyed by S&P Global Market Intelligence, 18 rate it at Strong Buy, nine call it a Buy, 10 have it at Hold, one rates it at Sell and one says Strong Sell. That works out to a consensus recommendation of Buy, with solid conviction.
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