Adobe: AI Narrative Reset. SEMR Acquisition. Strong Fundamentals. Trend Still Broken.
Semrush, GEO, and a 7% FCF yield. When a broken trend hides a quality compounder.
Adobe is back in M&A mode. After the failed $20B Figma FIG 0.00%↑ deal, the company just announced a definitive agreement to acquire Semrush SEMR 0.00%↑ for $1.9B in cash, a strategic bet on AI-driven generative engine optimization and marketing analytics.
The stock, meanwhile, has already been punished. ADBE 0.00%↑ is down ~36% over the last year, trading on ~19.1x TTM EPS and ~15x forward earnings, well below its own 5-10 year averages and at a discount to large-cap software peers. The question now is whether the Semrush deal and AI pivot mark a bottoming opportunity or just another rally trap in a broken trend.
Key Takeaways
ADBE 0.00%↑ is a high-margin, high-ROIC compounder (TTM net margin ~30%, FCF margin ~41%) now priced at ~19x TTM EPS and ~15x forward earnings with a PEG around 1.0, which is all a rare quality setup in software.
The $1.9B Semrush acquisition is strategically important for AI-driven marketing and GEO/SEO visibility but financially modest (<2% of EV), funded comfortably from a balance sheet with over $5 billion in cash, ~0.7x debt/EBITDA and ~7% FCF yield.
Fibs still point to an unfinished corrective leg lower, with a projected C-Wave path into the $200s if the downtrend persists. Trend is firmly bearish while price sits below the 20/50/100/200-week EMAs.
On the daily chart, price is pressing into a Fib extension cluster around $310-$308. A bounce into $330-$340 is plausible, but the dominant pattern is lower highs and lower lows with all major EMAs overhead.
Intraday 1h/2h/30m structure shows a short-term base near $315-$311 with resistance stacked at $324-$335. Momentum is weak; risk/reward still favors selling rips rather than chasing dips for now.
Core view: Fundamentals argue for accumulating ADBE 0.00%↑ on bigger dislocations, but the technicals don’t support aggressive longs yet. The better asymmetric long entry sits lower, in the $300 zone, or after a clean reclaim of $335-$340 - although there is a tactical opportunity today.
Major News / Pipeline
Semrush acquisition: $1.9B all-cash AI marketing bet
Adobe will acquire Semrush, a public SEO / brand-visibility platform, for $12/share, valuing the deal at about $1.9B in cash (a ~75–80% premium to the pre-deal price) (sending SEMR 0.00%↑ up 75% in a day). Semrush brings:
Strong enterprise momentum (Semrush highlighted >30% YoY ARR growth in the enterprise segment in its latest update).
A data asset that plugs naturally into Adobe Experience Cloud, Brand Concierge, and Adobe Analytics, tightening the loop between content, distribution, and measurable outcomes.
Financially, this is a homerun: at ~$1.9B against a ~$135B market cap and EV/EBITDA in the mid-teens, it’s <2% of enterprise value and easily funded from Adobe’s cash and annual FCF of roughly $9.6B.
Regulatory risk is lower than Figma: Semrush isn’t a direct core-design competitor and there’s no obvious horizontal “killer combo” argument. The bigger risk is overpaying for growth in a quickly evolving GEO/SEO market if AI platforms themselves commoditize some of what Semrush sells.
The Semrush deal is strategically meaningful for Adobe’s AI marketing story but too small to move the P&L needle near term. It mostly matters as a narrative and competitive positioning catalyst rather than a financial one.
When we last covered Adobe in September, we argued that the stock was attractively priced but technically stuck beneath a heavy band of resistance. Adobe failed repeatedly at the 50- and 100-day EMAs, rolled over, and broke the $340 floor that had been supporting the stock for months. The market essentially priced in slower AI monetization, stalled enterprise demand, and lingering skepticism after the Figma collapse.
Fundamentals did not deteriorate since then.
The stock failed to recover, despite its low multiple, because investors never got clean visibility into AI monetization.
That is why the Semrush acquisition matters now. It addresses the exact gap in AI expectations. Firefly needed better generation, but it also needed better intelligence, targeting, and feedback loops for higher monetization. Semrush gives Adobe real-time search, intent, and performance data, turning Firefly from a creative novelty into a system that can learn what actually converts.
Fundamental Analysis
TTM revenue at ~ $23.2B is still growing at high single to low double digits annually, with external sources pointing to ~9–11% expected revenue growth and ~11–13% EPS growth over the next several years. TTM EPS is about $16.08, implying a TTM P/E of ~19x at $318, versus a 10-year average P/E above 40x.
Gross profit ~ $20.7B on $23.2B revenue → gross margin ~89%.
Operating income ~ $8.4B → operating margin ~36%.
Net income ~ $7.0B → net margin ~30%.
Total debt ~ $6.6B vs cash and equivalents ~ $5.9B, implying net debt just over $1.2B.
With EBITDA around $9.6B, net leverage is roughly 0.1–0.2x.
External metrics show debt/EBITDA ~0.7x and current ratio ~1.0, confirming a low-risk capital structure with ample flexibility for buybacks and M&A.
Layer in the Semrush deal: even if fully cash-funded, net debt would still sit comfortably below 1x EBITDA, leaving balance-sheet risk negligible.
Valuation vs peers
At ~$318:
P/E (TTM) ~19x vs. forward P/E ~15x
EV/EBITDA ~15x, EV/Revenue ~5.8x.
Price/FCF ~14x (FCF yield ~7%).
Relative to mega-cap software peers (AAPL, MSFT, CRM, ORCL, INTU), Adobe trades on a lower P/E despite comparable or better margins and ROIC, and well below its own historical average multiple.
Operating cash flow TTM of ~$9.8B and capex of only ~$0.2B produce free cash flow of ~$9.6B, nearly 100% of net income and >40% of revenue. Buybacks have reduced the share count by ~4–5% YoY.
Fundamentals are not the problem. ADBE 0.00%↑ is a high-margin, high-FCF machine trading at a mid-teens earnings multiple with a PEG ~1 and minimal leverage. On fundamentals alone, the stock screens as a quality value. The disconnect lies in technicals and the market’s skepticism around long-term AI growth and competitive threats.
Technical Analysis
Weekly chart
Price has been in a structural downtrend since the 2023-2024 highs near the mid-$600s.
The weekly Elliott count shows a completed (a) down leg, a (b) corrective bounce, and an ongoing (c) wave that projects toward the low-$200s (~$210–$220) as a measured extreme target.
Price is currently sliding below all major weekly EMAs (20/50/100/200), which are stacked bearishly and sloping down.
Weekly RSI is in the mid-30s, not yet deeply oversold, and MACD is negative with no bullish cross.
Long-term trend is firmly bearish. The weekly structure says the corrective process is unfinished and leaves room for a deeper flush if macro or AI sentiment worsens.
Daily chart - medium-term structure
Daily price broke down from a $340-$360 range and is now around $318.
All key EMAs (20/50/100/200) sit overhead around ~$333, ~$342, ~$354, and ~$380 respectively, acting as layered resistance; the 20d and 50d are rolling lower.
Auto Fib retracement from the last $340 swing high to the $320–$323 low shows:
0.382 at ~$347, 0.618 at ~$337, 0.786 at ~$329 on the larger move.
Auto Fib extension of the most recent leg points to:
1.272 extension near ~$308–$309, 1.618 near ~$299, with deeper extensions into the high-$280s and mid-$270s.
Daily RSI sits in low-30s (mildly oversold), and MACD is negative but not yet turning.
The first meaningful downside magnet is the $310-$308 extension cluster. If that breaks decisively, the next logical zones are $300 and then $285–$275 based on stacked extensions and prior price pivots. Any bounce toward $330–$340 runs into heavy EMA and Fib resistance.
Intraday - short-term flow
2h chart: Strong downtrend from ~$360 into the low-$320s. The latest bounce stalled near a Fib retracement band around $324–$329, right under the 2h 20/50 EMAs. Extensions on the current leg down again highlight ~$312–$308 as a key short-term support cluster.
1h chart: Clear series of lower highs from ~$340. Fib grid puts:
0.618 retrace of the last push lower near ~$324–$325.
0.786 near ~$320–$321.
1.618 downside extension at ~$311 and 1.272 around ~$308.
The 1h EMAs are all above price and sloping down; RSI is trying to base in the low-40s but without a decisive momentum turn.
30m / 5m: Microstructure shows short-term basing around $317–$315, with repeated failures near $320–$322 and heavier supply near $324–$328. MACD on these timeframes oscillates around zero but with rallies consistently sold.
Short-term flows favor selling into strength toward $324-$335 until price can reclaim and hold above that band.
Technicals are clearly bearish across timeframes. The path of least resistance is lower while ADBE 0.00%↑ trades below $335–$340. Expect choppy bounces, but the cleaner asymmetric long setup likely appears either closer to $300 or on a decisive reclamation of $335–$340 with improving momentum.
Trade Plan
Cautious long, but only on better levels or after confirmation. No desire to force exposure in the middle of a live downtrend.
For tactical long in a multi-day bounce. today’s structure support a push higher before the next major decision point:
Entry Plan
Look to get long between $321–$326.
Two valid entry styles:
• Buy a pullback that holds above $318 and shows higher lows.
• Or enter on a break and hold above $325–$326, confirming strength.
The goal is to avoid buying weakness. We want confirmation that buyers are defending higher levels.
Risk Management
• Hard stop: $311 (invalidates the higher-low thesis).
• Aggressive stop (if trading tighter): $314.
If price trades below $318 and fails to reclaim quickly, step aside.
Targets / Trade Structure
• First target: $335–$338 – scale partial profits and reduce risk.
• Second target: $347–$352 – core bounce objective where sellers likely appear.
• Stretch target: $370–$375 – only hold a runner if trend strength remains and the market stays risk-on.
After Target 1 hits, stop should be moved to breakeven or just under $320.
Invalidation
Any daily close below $311–$312 kills the setup.
This is a bounce trade inside a broader corrective structure. Fundamentals support downside compression, but technically this is still a counter-trend position. Size smaller than a true trend trade and be disciplined with profit-taking.
Conclusion
ADBE 0.00%↑ is a rare setup: a top-tier software franchise with elite margins, high-20s ROIC, and a 7% FCF yield now priced in the mid-teens forward P/E. The SEMR 0.00%↑ acquisition strengthens the AI marketing narrative and Experience Cloud positioning without stressing the balance sheet, but the chart still shows a downtrend that is not yet repaired. For long-horizon investors, this is a name to accumulate on weakness, not chase on AI headlines. The highest-conviction approach is patience: let the technical correction play out toward the low $300s or play it out tactically around the $320 range with tighter stops.
This analysis is for informational and educational purposes only and does not constitute financial advice.
See more of IWP’s latest posts:
That 7% FCF yield is hard to ignore when you consider Adobe's track record of cash generation. The broken trend is concerning, but sometimes the best entries come when technicals look ugly and fundamentals look solid. The Semrush acquistion could be a smart move if it acelerat es the AI-driven marketing story.