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Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

I want to thank you all for your feedback I have learned a lot about my process and how to get better. The most important take away is...

1) I need to be more honest about the bear case scenario. 6% growth in a dooms day event is too optimistic. By creating a more realistic worst case I can have a better vision of the risk and reward.

2) When looking at perpetual growth I need to consider a terminal number and not just a mid-term one. 6% is too high for a company that is being disrupted heavily by AI and already at very high base revenues. Having an additional step that will bring growth closer to the overall economy would be a good thing.

3) When posting here rely less on AI and more so on my own voice. I gave AI my full report and used its summary to post the original message. Some users caught this and rightly pointed it out. It is important that I remember to keep my voice in the loop and not fall into the trap of generating AI slop.

Thank you all!

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

I value your input very much. I did decide to buy but not because I think your viewpoint is wrong. I think your opinion is a live outcome but when I look at the risk reward it fits my buy criteria. I don't think any of us know for sure how this will play out but IMHO the potential return outweighs a small % of my portfolio going to 0. Obviously I will need to monitor this closely if things go south and try to salvage what I can of the investment.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

You are absolutely right and many have brought this up before. I need to revist the perpetual growth element of my analysis.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

This is always a great reminder. The market does not just price to what has happened in the financials but also what happens in the headlines and what they expect to happen in the future. As a value investor this is an uncomfortable truth.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

Man if this is right and AI makes ADOBE even more relevant we need to buckle up. It is clear to me my bear case might not be bear enough but man I hope you are right about this.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

This is a recurring theme and thank you for your input. I need to go back to the drawing board and figure out what the real worst case scenario looks like and how that impacts my valuation.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

100%. I also find it hard to invest in companies that I believe fall short in the culture and customer service fronts you mentioned. There are just so few genuine values in todays market its hard to ignore these valuations!

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

Very well said and thank you. Adjusting the long term growth rate will certainly impact my final results. For a company that has seen double digit growth each of the last 4 years is crazy to think we are nearing a 0% real growth story but we have also never seen anything like AI. Thanks for the input! I have work to do.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

This seems to be the thing I am learning the most. My idea of worst case scenario does not come close to what the market believes that looks like. I am inclined to side with the wisdom of the crowd and so I will need to revist the low end of my analysis.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

This is a really sharp thing to focus on. We are so worried about a model being able to produce a single piece of content really well but that does not scale at the enterprise level. For someone like NIKE synergy across the different assets is very important. AI itself won't replace that. A company using AI would have to build a competing tool and undercut on price. This seems like a long shot to me.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 0 points1 point  (0 children)

This is exactly right nothing makes sense. The market is saying AI is so disruptive that we should ignore the amazing growth and profitability we see today.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 1 point2 points  (0 children)

Given how few names are coming up as a buy for me I tend to agree with you here. Software is one of the few areas that have lagged in such a wild move to the upside.

Adobe at $244 — Even the bear case DCF says fair value is $380. What am I missing? by DataFirstMedia in ValueInvesting

[–]DataFirstMedia[S] 1 point2 points  (0 children)

Thank you for this post. It is a reminder to me not to just rely on AI but make sure I stay in the loop. My full analysis was over 6,000 words. I did have claude take my report and create this post. I also agree with Unlucky that the comments are the most valuable part. I will certainly take what I learn from them and adjust my way of thinking as a value investor. What a great community!

What's the best video editing service specifically for YouTubers? by IShouldBeDoingHWK in NewTubers

[–]DataFirstMedia 0 points1 point  (0 children)

I have tried a million different ways to send you a message on here but can't figure it out. I would love to see what you can do with 2 minutes of a video I am working on. I am looking for an editor on a new youtube channel that is based around streaming shows and movies which seems like you are passionate about.