Adobe is a strong turnaround opportunity; current valuation discounts disruption despite consistent revenue growth and high FCF yield.

Adobe is down massively from $660 per share. Now it's down to 255. So the stock is still down around 60 to 70% from its all-time highs.

So let's look at each of these and start off with Adobe. I believe Adobe has a high potential for a turnaround and the reason why is because this is one of the clearest cases of the fundamentals not matching the story.

There is a massive massive disconnect. Typically, when you hear a story of a company, the fundamentals should follow it to some degree. They they should go up with the story or they should go down with the story.

But in this case, the fundamentals are saying one thing, the story is saying an entirely different thing.

We can look, for example, about the risk of disruption. This is what Adobe's actual revenue looks like. Can you see the disruption in the revenue? Well, let's zoom into the past 10 years.

Can you see the disruption in the revenue? I sure can't. It just grew 13% year over year. It's one of the most gradually growing, consistent growing quarterly revenues that we've ever seen in a company.

In fact, it's better than most companies out there. You would have a hard time finding another company that grows as consistently as Adobe.

But even so, there are still big concerns for Adobe and reasons the stock is down so much and so cheap. And that is because there's a new paradigm shift. There are new ways to edit videos, new ways to edit images, and this is impacting Adobe's decisions.

For example, they are making strategic pivots to try to gain and be the central platform for this new wave. They're trading off lower revenue growth in the future for faster user acquisition on all of their free platforms.

So, Adobe's still trying to grow their ecosystem and get more people into the Adobe suite. They know that they own the high end. If they can get more of the low end users, the more simple use cases for AI into the Adobe suite, they can monetize them later on.

Leadership frames this as a now or miss it moment to become the default AI platform for creativity and productivity across web, mobile, and conversational surfaces. While this transition is happening, the market has discounted Adobe to a massive extent already.

Again, this company is trading at below a 10 forward PE ratio. The free cash flow yield is 10.4%. Adobe trades at a valuation that already anticipates destruction to capital. It already anticipates much slower growth, unattractive returns.

So, if you're the daring type and you want to go in for a turnaround play, Adobe today represents one of the best opportunities.