20 billion USD deal could be endangered

European antitrust regulators are gearing up to initiate a formal probe into Adobe's 20 billion USD acquisition of cloud-based designer platform Figma. The investigation, expected to commence later this year, will focus on concerns of anti-competition, and could potentially disrupt or halt the deal. This development reflects the broader concerns of global regulators regarding major tech companies acquiring smaller, innovative competitors and potentially stifling competition. While Adobe is engaging in constructive discussions with regulators in the UK, EU, and the US, Figma also anticipates ongoing conversations with regulators as the process unfolds.

Despite falling below, the turnover threshold that typically triggers an antitrust review in the European Union (EU), Adobe has been informed by EU regulators that it must obtain antitrust approval for its acquisition of Figma. The regulators have indicated that the deal raises concerns warranting a review, demonstrating their willingness to scrutinize transactions that may have an impact on competition, regardless of the transaction's size. [1]

Adobe earnings and optimistic target price

Just few days before the earnings release, Wells Fargo raised the target price for Adobe’s stocks from 420 USD to 525 USD. [2]* It is not clear if it was pure speculation, or they managed to predict good times ahead of Adobe, however, they were on track. Adobe's latest earnings report was received positively overall, as it was much better than expected. The report contained several positive aspects: the company exceeded revenue and adjusted earnings expectations for the quarter, raised its annual guidance, and provided a higher earnings outlook for the next quarter compared to analysts' projections.[1] Adobe also generated solid cash flow during the quarter and maintained a healthy balance sheet with a significant amount of cash and manageable debt. [3]

Adobe is actively including in the world of AI

Leading technology companies, including OpenAI, Alphabet Inc (Google), Microsoft, and Adobe, have been in discussions with major media outlets regarding agreements on the use of news content to train artificial intelligence (AI) technology. These tech giants have engaged with news executives to address copyright concerns related to their AI products, such as text chatbots and image generators. Publishers like News Corp, Axel Springer, New York Times, and The Guardian have individually been in talks with at least one of these companies. The potential deals could involve media organizations receiving a subscription-style fee for their content to be used in developing chatbot technologies like OpenAI's ChatGPT and Google's Bard. [4]

Adobe’s stocks overview

Stocks came to the market in August 1986 and the price was only 0,22 USD. With computers evolution, Adobe’s stocks nicely grew over time, and reached the highest point in November 2021, when the price was 688 USD per stock. This marks an amazing growth of more than 301,000% since starting their journey on stock exchange.  After reaching the top, stocks had a smaller correction and fell to 285 USD, however they are nicely growing now and are already back up to the current price of 495 USD. * If the Wells Fargo predictions will come true, it shows a very nice window for potential growth. Adding AI to all of this, could only mean that company certainly has plans to grow in the future. [1][5]

Movement of Adobe stocks in the last five years. (Source: Google Finance) *

Conclusion

As mentioned in the beginning, the digital world is rapidly growing day by day. It is important for big tech companies to keep developing and innovating new things. With Adobe being one of the most recognisable companies since the invention of computers, it is a good and interesting stock to keep an eye on. Their earnings releases, as well as their integration into AI, shows that they are willing to achieve more and are not at the end by any means.[3]

Adam Austera, chief analyst Ozios 

* Past performance is no guarantee of future results.

[1,2,3] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.

[1] https://www.investing.com/news/stock-market-news/adobes-deal-to-acquire-figma-under-threat-from-eu-regulators--ft-3108439

[2] https://finviz.com/quote.ashx?t=ADBE&p=d

[3]https://www.fool.com/investing/2023/06/16/adbe-stock-up-earnings-beat-raised-guidance/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article

[4] https://finance.yahoo.com/news/openai-google-adobe-talks-media-202037479.html

[5]https://www.google.com/finance/quote/ADBE:NASDAQ