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Why Adobe Is One of Jim Cramer’s ‘Cloud Kings’

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Mar. 16 2018, Updated 9:31 a.m. ET

The cloud kings

Earlier in the series, we discussed the factors and offerings that are expected to drive Adobe’s (ADBE) growth in fiscal 2018. We also discussed Adobe’s leadership position in digital marketing and enterprise software suites. Earlier this week, Jim Cramer, host of CNBC’s “Mad Money,” highlighted a new stock selection in the tech space that he calls “the cloud kings.” He gave this distinction to seven software companies “that are transforming the way their customers do business.” Adobe, ServiceNow (NOW), Red Hat (RHT), VMware (VMW), Splunk (SPLK), and Workday (WDAY) made Cramer’s list.
cloud kings

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Stock performance

As the above chart shows, the above-mentioned companies’ stocks have bounced back between 18% and 30% since the broader market’s February 9, 2018, lows. In February 2018, the broader market turned negative, and the S&P 500 benchmark (SPX) fell 3.9%. If we look at their one-year performance, their stocks have surged in the range of 38% to 98%.

Adobe’s distinct position

Jim Cramer said, “When it comes to digital media and marketing software, Adobe is in a league of its own.” He further added, “This company has a terrific long-term track record, but the stock really took off a couple of years ago after Adobe began to transition from an old-school, on-premises software company to a modern, cloud-based, software-as-a-service business.”

Moreover, according to Cramer, Adobe’s transition to the cloud and SaaS model has “turbocharged” its earnings growth. In 2017, the overall cloud space grew 24.0% on a year-over-year basis to become a $180.0 billion market. According to Gartner, cloud spending is expected to rise from $260.0 billion in 2017 to $411.0 billion by 2020.

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