July 21, 2024

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Here’s the Artificial Intelligence (AI) Growth Stock Down 24% I Just Added to My Portfolio

2 min read

Every so often, the market will put a great stock on sale, and it’s important to recognize whether that sale is a buying opportunity or a warning to investors.

The market may put a stock on sale because operations are deteriorating, competition is eating into its market share, or for several other legitimate reasons. Sometimes, though, the market ends up weighing near-term challenges much more heavily than a positive long-term outlook of a company. And that can be a great opportunity for investors.

Adobe (NASDAQ: ADBE) is one such company that’s seen its stock beaten down recently. It’s developing innovative solutions and features using generative artificial intelligence (AI) to support further growth in its market-leading software suites. Despite the market sending shares higher after a strong second-quarter earnings report and improved outlook, the share price is still down 24% from the all-time high it reached at the end of 2021. There’s still an opportunity for investors to buy shares today.

A professional holding a pen while looking at page layouts on a computer.

Image source: Getty Images.

Injecting generative AI into everything it does

Adobe is a market leader in enterprise-level content-creation software (Photoshop, Lightroom, Illustrator) and document management (Acrobat, Acrobat Sign), as well as marketing and advertising solutions.

Its Creative Cloud and Document Cloud subscriptions provide a stable source of recurring revenue. The software suites are standards in the industry, which creates two advantages.

Since everyone else is using Adobe file formats, there’s a network effect whereby people in the industry need Adobe software to interact with one another. A designer will send an Adobe file to a client or another designer. If they don’t have Adobe’s software, they might not be able to interact with the design as intended.

The second factor is that Adobe’s software becomes very sticky. No manager is going to risk switching software suites just to save a few bucks. It would require retraining workers, and it could result in an…

2024-06-19 18:00:00

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