Adobe Sets Its Sights on Marketing Technology

We believe  Adobe (ADBE) is a blue-chip technology stock that offers great growth opportunities over the next several years. We are maintaining our wide moat and stable moat trend ratings but have lowered our fair value estimate to $296 per share from $300 to reflect slightly lower long-term margin assumptions. Even so, we still view the shares as modestly undervalued. Our fair value estimate implies a price/earnings ratio of 31 times fiscal 2020 non-GAAP earnings per share.Adobe groups its Creative Cloud and Document Cloud in the digital media segment, which accounted for 70% of revenue last year. The company has come to dominate the content creation market with iconic products like Photoshop and Illustrator. Adobe also created the PDF file format and remains the leader in PDF editing software today. Now that the software-as-a-service transition for this segment is complete, we expect the digital media segment to grow by 15%-20% in each of the next several years.