Returns as of 12/31/2021
Returns as of 12/31/2021
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As you might imagine, achieving a $1 trillion market cap is an impressive milestone. In the U.S., less than a dozen companies have reached that rare air.
In this segment from “The Five,” recorded on Dec. 14, Fool.com contributor Trevor Jennewine talks about one stock he thinks has a good chance of surpassing a $1 trillion market cap by 2030.
Trevor Jennewine: One of the companies that comes to mind when I think about potential trillion-dollar companies is Adobe (NASDAQ:ADBE). I think sometimes it flies under the radar for some investors. But Adobe as one of the biggest software companies and the most diversified software companies out there. It breaks its business into three verticals.
It has creativity software, the digital documents software, and then software for customer experience. When you look at Creative Cloud, you have applications like Photoshop, Illustrator, Premiere Pro, After Effects, and a lot of those are industry standards for creative professionals. They have a strong mode there, and then the same applies for Document Cloud. Yeah, pretty much everybody uses Adobe Acrobat for PDF management. Then they have their Experience Cloud products which are tools for analytics, marketing, and commerce. Basically, they help businesses capture consumer data, target content, and then personalize the consumer journey across all these different digital touch points.
Like I mentioned, they have a very strong position in their Creative Cloud. But Gardner has recognized Adobe as a leader in digital experience platforms. Forrester Research has recognized Adobe as a leader in enterprise marketing software, content management, business-to-business commerce suites. This company, they compete in a lot of industries and they have a strong competitive position in a lot of the areas in which they compete.
The financial performance has been consistently strong for years, over the past year with revenues up 21 percent to over 15 billion. Free cash flow grew 34 percent to 6.6 billion. Management puts the market opportunity at 147 billion by 2023 so they have plenty of room to grow. Instead of doing nine years, I’ve looked at it over 10-years. If they’re able to grow revenue at 15 percent per year over the next decade, the total revenue will quadruple to 60 billion and that means Adobe could achieve a one trillion dollar market cap with a price to sales ratio of about 16 or 17, which is less than the 21 times sales at which it currently trades. I think that’s a very possible scenario.
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Stock Advisor launched in February of 2002. Returns as of 12/31/2021.
Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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