Adobe stock crashed 12% despite earnings beat

Adobe stock ADBE crashed despite earnings beat. I personally think this is pretty normal and will continue to hold the stock, here is why I think Adobe will not be disrupted by other AI tools:

Adobe is focusing on commercially safe AI generated images(Thus lower quality), unlike competitors like Midjourney which trained their model using scrapped data from the internet that may cause copyright issues.
AI generated images are not perfect and it will need to be edited most of the time. If images are generated from inside Adobe products like photoshop, it will have better tooling integration and make images more easily edited.

$ADBE revenue grew by 12% and eps grew YoY from 3.8 to 4.48 per share, about 17.9%. The company also bought back 3.1 million shares of stock. The stock may look expensive for share buybacks, but looking long term it is still a great deal for shareholders. A DCF calculation gives an estimated value of $543 per share, suggesting a 12% annual return for the next 5 years. Here are the DCF assumptions used:

TTM free cashflow(FCF) of $6.9 billion
Future 5 year FCF annual growth of 12%
Future price to FCF of 30 (10 year average is 34)
Discount rate of 10%

I believe the company is fairly valued and will continue to hold.

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DISCLAIMER: This post is the author's personal opinion only and none of it should be considered financial advice.