Two Simple Words Keep Adobe Stock Charging Ahead

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Adobe (NASDAQ:ADBE) stock has been around a long time. It is one of the tech industry pioneers that transitioned from selling software to enterprise companies to delivering professional products all the way through the funnel to individuals.

ADBE stock: Two Simple Words Keep Adobe Stock Charging Ahead

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It was an original Silicon Valley company, founded in San Jose in 1982. That’s a long time ago, especially in tech world. Remember, Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google is only 20 years old.

That means ADBE stock has survived the dot-com bust in 2000 as well as the financial meltdown in 2008. It has also been able to grow as tech has developed, competitors have risen and fallen and revenue models have changed.

Adobe Stock Continues to Look Strong

That is an immense achievement. Adobe isn’t a niche player that makes one unique product that has significant barriers to entry. Its growth depends on more and more people and companies using its products. That means it has to stay not only relevant, but ahead of the curve, anticipating the needs of its customers.

It made (and continues to make) significant inroads into design software for rapid prototyping (aka, 3D printing) before it started to become mainstream, for example.

But the big point of inflection for ADBE is summed up in two simple words: recurring revenue.

Like many of the older software companies, Adobe was based on a model that relied on regular updates on their software versions. Microsoft (NASDAQ:MSFT) was another prime example.

They would sell personal and professional versions of one program, like PhotoShop, and then update those versions over the next year or two. Customers would then go out and buy the new software when it was available.

However, as the internet became more integrated into business life, companies started to build their models around subscription-based services. Instead of buying each version of new software from a vendor, people could buy a monthly or yearly subscription that allowed their software packages to be updated as soon as new versions were available.

Imagine how much easier this was for companies with hundreds and thousands of employees, each using various software packages. Logistics were simplified, installation times evaporated and IT staff could be more productive. Plus, for companies like Adobe, revenue became more consistent and reliable. That is something the stock market loves.

While that transition took some time, ADBE stock has been a big beneficiary of the results, both on the equity side and the business side.

It reported Q1 earnings in March and showed that earnings and revenue are doing as well as expected. It also projected the full year to be along analysts expectations as well.

The other big thing ADBE is developing now is partnerships with two of the world’s top ecommerce companies — Amazon (NASDAQ:AMZN) and Google.

It’s allowing third-party sellers to use its Magento design suite to make ads and landing pages for Amazon vendors. And on GOOGL, it’s providing Magneto to online sellers to design, track and manage its ad campaigns. These could bring about another round of massive growth for ADBE, which continues to stay one step ahead of its competition.

Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough StocksAccelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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