If You'd Put $1,000 Into Adobe Stock 20 Years Ago, Here's What You'd Have Today

The promise of generative artificial intelligence has Adobe (ADBE) stock back to its market-beating ways after a protracted period of uncharacteristic underperformance. 

Shares in the maker of application software for creative types are up 60% so far in 2023, adding $90 billion in market capitalization along the way. That's a sum greater than the market values of CVS Health (CVS) or Citigroup (C). 

It should be noted that Adobe's outsized gains this year are a relatively recent phenomenon, coming mostly after the company announced in May that it was adding AI tools to Photoshop.

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Jumping on the AI bandwagon was just what Adobe needed. 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. 

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 more than 23%. By comparison, the broader market returned 10% over the same span. ADBE stock also clobbered the S&P 500 over the past 20-, 15-, 10- and five-year periods.

The early 2020s have been a different story entirely. A terrible 2022 has ABDE stock actually lagging the S&P 500 over the past three years. 

Happily for shareholders, the AI feeding frenzy appears to have put shares back on track. 

For example, Wells Fargo analyst Michael Turrin raised his rating on Adobe stock to Overweight (the equivalent of Buy) from Equal Weight (Hold) in early June, citing the boost from AI.

"The AI debate continues to drive ADBE," Turrin wrote in a note to clients. "Generative AI is a tailwind to ADBE, as we expect much of the early value to accrue to established platforms and see potential for further break-out as products are monetized."

The bottom line on Adobe stock

Adobe's hot 2023 run is 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 nearly $28,000. The same money invested in the broader market would theoretically have grown to $6,600.

True, Adobe stock remains about 25% below its all-time closing high set back in November 2021, but analysts think it can reclaim those heights eventually. 

After all, Wall Street is pretty bullish on the name. Of the 38 analysts covering Adobe stock surveyed by S&P Global Market Intelligence, 17 rate it at Strong Buy, seven call it a Buy and 14 have it at Hold. That works out to a consensus recommendation of Buy, albeit with somewhat mixed conviction.

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