After changing course to becoming a pure-play subscription tech company, shares of Adobe Systems Inc. (NASDAQ:ADBE) have been on a tear, increasing more than 12% year to date, an impressive increase for just one month.
The amount of pricing power Adobe wields is impressive, and combined with a subscription model, the ability of Adobe to continue to raise prices in small increments over time will provide the business with improved margins and earnings growth even as subscriber growth matures over time. Adobe remains in a growth-driven stage in the company’s life cycle, and as such has many more years before it potentially reaches maturity.
That said, it appears to me that Adobe’s product offering and market power is very similar to Microsoft Corporation (NASDAQ:MSFT), a company I also believe to be a great long-term play for investors.
As a long-term play, Adobe appears to have all the elements of an investment technology investors should consider. The wide moat which comes with having significant market share in a segment with few real competitors is one thing; having a management team with the agility and audacity to change and adjust the way the company operates to improve shareholder value is completely another.
Adobe certainly is not cheap at current levels, however with an impressive long-term growth rate anticipated for this company, I wouldn’t hesitate adding a small position with future additions on any potential weakness moving forward.
Invest wisely, my friends.
