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How Adobe Is Positioned in the Application Software Space

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Adobe’s scale in the application software space

So far in this series, we’ve discussed Adobe’s (ADBE) analyst expectations for Adobe’s soon-to-be-announced fiscal 1Q18 results, as well as the company’s consistently improving performance. In this part, we’ll compare the company’s value proposition with that of other software companies in the United States.

On March 13, 2018, SAP (SAP) with a market cap of $132.2 billion was the world’s largest player by market capitalization in the software space, followed by Adobe and ServiceNow (NOW), which had a market cap of $108 billion and $30.7 billion, respectively. Workday (WDAY) and Red Hat (RHT) are some other prominent players in this space.
application software

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Adobe’s valuation multiples

Adobe was trading at a forward EV-to-EBITDA multiple of ~27x on March 13, 2018. This metric was higher than SAP’s multiple of ~14.0x. In comparison, Red Hat’s and Workday’s multiples stood at ~33.6x and ~55.1x, respectively, on the same date.

Adobe’s dividend yield

SAP’s forward annual dividend yield was ~1.3% on March 13, 2018. Adobe, Red Hat, and Workday don’t pay dividends.
Investors who want exposure to Adobe’s stock as well as the application software space can consider investing in the PowerShares QQQ ETF (QQQ), which has 0.84% exposure to Adobe. Application software accounts for ~24% of the fund.

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