If You'd Put $1,000 Into Adobe Stock 20 Years Ago, Here's What You'd Have Today
The AI revolution has turned Adobe stock into a long-term market laggard.
If anyone should be an AI doomer, it's longtime shareholders in Adobe (ADBE). One of the hottest stocks of the 2010s was a massive market-beater for ages, and now it is most certainly not.
The late 2022 launch of ChatGPT, which marked the beginning of the AI revolution, has long-term ADBE shareholders – and plenty of more recent investors — sitting on a big-time market laggard.
For years, Adobe 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. And the company's transition to a cloud-based subscription model more than a decade ago became a highly positive case study for the software industry.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
It was tricky and risky to shift from being a licensor of software to offering software-as-a-service, but the market loved Adobe's results. In 2011, revenue increased 11% annually. Five years later, the top line was growing by more than 22% a year. Operating margins went along for the ride, topping 30% annually vs a low point of 10%.
Adobe's big bet paid off, and the market loved it. A stock that fetched about $60 a pop at the end of 2013 cost nearly $700 at its late 2021 peak.
My, how times change. Shares first started to slide when Adobe found itself under pressure from upstarts like Canva and Figma (FIG), not to mention established behemoths like Microsoft (MSFT).
And then came AI.
True, Adobe's products still command market shares of anywhere from 50% to 75%, but investors are now seriously questioning the company's growth potential. That's why they're not willing to pay the same premium they once did for this storied name.
ADBE has shed two-thirds of its value since its 2021 record close. A stock that used to trade at more than 40 times estimated earnings now goes for less than 10.
As a result, Adobe now lags the broader market on an annualized total return basis by 30 to 50 percentage points over the past one-, three- and five-year periods.
The bottom line on Adobe stock
There's no way around it. Adobe is now a buy-and-hold bust.
Have a look at the chart below and you'll see that a $1,000 investment in Adobe stock 20 years ago would be worth about $ 6,400 today. The same money invested in an S&P 500 ETF would theoretically have grown to about $8,600.
Sadly for shareholders, and would-be ADBE bulls, Wall Street has a mixed view on whether the tech stock can recover anytime soon. Of the 39 analysts issuing opinions on Adobe surveyed by S&P Global Market Intelligence, seven rate it at Strong Buy, four call it a Buy, 23 have it at Hold, one says Sell and three say it's a Strong Sell.
That works out to a consensus recommendation of Hold, with a bearish bias.
More Stocks of the Past 20 Years
- If You'd Put $1,000 Into Nvidia Stock 20 Years Ago, Here's What You'd Have Today
- If You'd Put $1,000 Into Apple Stock 20 Years Ago, Here's What You'd Have Today
- If You'd Put $1,000 Into Amazon Stock 20 Years Ago, Here's What You'd Have Today
