Adobe is a superior investment compared to Lululemon due to rising free cash flow, strong fundamentals, and projected EPS growth.

He's also been quietly buying Adobe.

He's buying Adobe where the narrative is AI will destroy it

Next company, Adobe. The company that I own that I remind you, we're never here to give a stock tip. So, don't buy a company because I own it. But it is the company behind Photoshop.

Bur started buying it early this year and then it fell 28% and he did a signature move. He bought even more near the lows around $200 a share and his reasoning is fantastic.

Everyone is terrified that AI will destroy Adobe. But Bur's bet in his own words, "LMs, no matter how advanced they get, will never beat the creative instinct of a talented human being."

In plain English, he thinks AI becomes a tool that professionals use inside Adobe, not a replacement for it.

And guys, I want to remind you both Chat GPT and Claude integrate with Adobe and have a partnership with Adobe. Do not forget that.

But Bur's patience has been paying off. After buying that dip, his original Adobe bet had climbed all the way back into the green by early September.

Well, first off, Adobe owns the entire professional creative toolkit that pros use every single day, and its own AI products are already exploding. Its AI revenue tripled to over 500 million the last year, and it's just getting started. So, AI might actually help Adobe, not kill it.

New AI tools like Canva and Midjourney let regular people make professional looking images in seconds without ever learning Photoshop. And that could steal away a huge chunk of Adobe's customers.

And there's a fresh worry. Adobe just announced that its long-term CEO of 18 years is stepping down. A new one takes over in December, and the very executive that many people expected to get the top job is leaving as well. Messy leadership at the worst possible moment.

A positive spin might be an 18-year vet might not be thinking about this in the new way of doing AI. We don't know. what's interesting, guys, is I love using Adobe in my examples when I teach our valuation master class.

It's a great balance sheet company, revenue company, not just because of my bias. I own the company.

So guys, the price of Adobe is 103 billion. Enterprise value is 116. That's a $13 billion difference essentially of debt. Guys, look at this. Their free cash flow was $10.3 billion in the last year.

The 5-year average is 8 billion. Their free cash flow is up 25% over the last 5 years.

Now, here's the best part. This is their free cash flow by year. This is their free cash flow quarterly. Guys, this is when this is about when AI started to become big. And yes, it saw a dip.

And look at this free cash flow. Now, I'm not saying that this means the company's not dying, but boy, this is when the big surge of AI has happened. And look at their cash flow.

It's going up still. So, I feel much better about that.

Okay. Next thing I love, high returns on capital. 27% a year for the last five, 37% last year, selling for 10 times free cash flow. And the other thing, guys, is their free cash flow is greater than their net income by a good amount. That's not a very common theme.

profit margins been pretty steady for the last 10 years. Look at this gross margin, 90%. For those of you who don't know what that means, every extra dollar they bring in, 90 cents of it goes to the bottom line before overhead and taxes.

That's how you grow your profit by a lot. Which is why I'm surprised their profit margin is actually pretty steady over the last 10 years.

Revenue growth 11% a year for the last three. I want to remind everybody this is 11% a year while AI was taking off. 11.9% a year for the last five, 16.8% a year for the last 10.

Yes, growth has slowed. Doesn't mean it's dead. I want to remind everybody of that over and over.

Let's look at our eight pillars. Another eight pillar thriller. Does Michael Bur watch our channel then? Is he only buying my eight pillar thrillers? Is that what's going on here? I'm just kidding.

All right, so we have the eight pillars here just like Lululemon. It's just telling us a snapshot right here. The difference is Adobe is still growing. Lululemon is trying to turn itself around, but ironically, they're selling for very close to the same price to free cash flow, which is kind of interesting to me.

So, let's see what the analysts think about Adobe. They have Adobe's profit going from 24 per share to 35 over the next four years. Not bad for a dying company. And the dying business gen going from 26.5 billion in revenue

So, let's pull up our stock analyzer tool, guys. I'm going to go lower here on the revenue growth. I'm going to go four, seven, and 10. Next, remember their free cash flow is greater than their profit margin.

Free cash flow is more important. So, I'm going to focus on this number. I did 35, 38, and 41. Keep in mind, this 38 is lower than they've done in all the last 10 years. lower than the last 10 years.

Just remember that. Next, I'm going to go conservative on PE. Even though they have high and getting better returns on capital, I went 161922. For the record, I think it should be higher.

And then finally, my 9.5% return. I hit the analyze button. The stock's currently at 256. I have a low price of 360 based on cash flow. high price of830, middle price of 550 with very similar potential returns as Lululemon.

Guys, I'm not going to lie to you. I actually personally believe this is a better investment than Lululemon.

Bur bought Adobe near $200. A guy in our community named Zach bought Adobe near the lows back in February when everybody was screaming that software was dead. Guys, he's not smarter than you.

He just had the number in front of him and you didn't.

It's the same stock analyzer tool on your screen right now. It's the same eight pillars. It's the same key metrics. But in this situation, you put your own assumptions in on Lululemon, Adobe, Nvidia. You get your own number today.