Adobe Stock Prediction: The Why And How Adobe Can Compete With Microsoft’s Office 365

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

ADBE Stock Prediction


  • Adobe’s long-term prosperity is better if it can compete with Microsoft Office 365.
  • The best acquisition target which could help Adobe jump-start its subscription-only Office productivity suite is Kingsoft’s WPS Office or Corel’s WordPerfect.
  • KingSoft’s decision to keep distributing, free but advertising-supported version of WPS Office has helped it achieve 1.25 billion installations. The ad-free, WPS Office Premium sells for $29.99 per year.
  • WPS Office is the industry-standard productivity suite in China’s education and government entities. By buying KingSoft, Adobe could establish good guanxi with China’s rulers.
  • Adobe still touts go-long signals from its short-term and long-term algorithmic forecasts.

Adobe (ADBE) has delivered +32.5% return since my last go-long endorsement for ADBE last September 22, 2016. However, I am again endorsing ADBE as a Buy. This company’s decades-long monopoly on design/creative software is why it is now a leader in consumer and enterprise SaaS (Software-as-a-Service). ADBE trades at a super-high valuation of 54x P/E because not even software industry leaders Microsoft (MSFT) and Autodesk (ADSK) can offer serious alternatives to Adobe’s Creative Cloud software suite.

My fearless forecast is that ADBE still has 15-20% upside potential for the next 12 months. Creative Cloud’s paid subscriptions last was 9 million. I expect Adobe to achieve 11 million Creative Cloud subscriber count by end of 2017. The Annual Recurring Revenue is Adobe’s biggest revenue and net income contributor. As long as Creative Cloud keeps growing its paid subscriptions, its stock will continue to receive positive sentiments from the stock market.


ADOBE Stock Prediction

(Source: Google Finance).

Adobe Still Needs To Grow Beyond Its Creative Cloud Comfort Zone

I know that Microsoft and Adobe has a multi-year enterprise partnership involving Azure and Marketing Cloud. However, in the long run shareholders of Adobe will benefit more if it could also compete with the consumer business of Office 365. There’s a global limit to the number of creative/design professionals. Creative Cloud’s subscription base will eventually reach saturation point.

Relying too much on Creative Cloud, Adobe’s growth could slow down notably (or even stagnate) 3-5 years from now. Adobe needs to diversify its software subscription service to include office productivity. As of now, Adobe can exploit the current situation that small businesses and home users deserve an alternative to Microsoft’s Office 365.

Adobe is hoarding too much cash, $1.06 billion. It should use some of that idle money to acquire a potential alternative to Office 365. Adobe can buy WordPerfect from Corel Corporation or WPS Office from KingSoft. In my book, WordPerfect and WPS office are the best alternatives to Office 365 and Office 2016. My view is that it won’t cost Adobe more than $100 million to buy a re-branded version of WPS Office from KingSoft. Buying WordPerfect will probably cost less than $20 million.

I prefer Adobe to go after KingSoft because WPS Office has a much bigger installed base than WordPerfect. The Android, iOS, and Windows version helped WPS Office achieve 1.25 billion installations. WPS Office only had 300 million (120 million from non-China users) installations in 2014.

The Android version of WPS alone has 500 million users.

(Source: KingSoft)

This massive success is due to KingSoft’s decision to release a free, but advertising-supported version, of WPS Office for desktop and mobile devices. It also helps that WPS Office’s Writer, Spreadsheet, and Presentation programs looks 95% like Microsoft’s Word, PowerPoint, and Excel. Since 2005, KingSoft has copied the user interface and user experience architecture of Microsoft’s productivity software programs.

I am using the free WPS Office’s word processor, Writer to write this article. It sure feels and looks like MS Word. There’s no grammar checker (it has a spell checker) and it delivers a small non-intrusive pop=up ad every 10 minutes or so if you use it while connected to the internet. The ad-free premium version costs $29.99/year.

(Source: Motek Moyen)

How Adobe Can Rival Office 365 on Windows and Mac Platforms

Adobe can incorporate an office productivity suite inside Creative Cloud using a re-branded WPS Office suite. Adobe can call it Creative Office 24/7. Adobe can charge $2.99/month for it and make decent money selling it to small businesses and home users.

Small and medium design studios, ad agencies, animators, video editors, graphic artists, web designers, and motion artists also use office productivity suite. A large number of the 9 million Creative Cloud subscribers are ready customers for Adobe Office 24/7. Adobe could also make money by creating a Mac port of its own WPS Office version. Kingsoft’s failure to port WPS Office to the Mac platform should be exploited by Adobe.

Adobe only needs to avoid going after the enterprise customers of Office 365 and Microsoft Office 2016. This is to prevent irritating Microsoft.


Kingsoft Office (old name of WPS Office) was and still is the standard office software suite in Chinese education and government entities. By buying a WPS Office reseller license, Adobe can develop better guanxi (special relationship) with China’s political and business leaders.

Adobe’s vote of confidence on WPS Office will be perceived as an endorsement for Chinese-developed software. In return, millions of new subscription for Creative Cloud’s design/video editing/animation software products could be gained from China’s government agencies, schools, and state-owned enterprises.

Just in case Adobe fails to acquire WPS Office, Polaris Office is also another copycat of Microsoft Office that could be bought.

My buy rating for ADBE is in-line with the positive algorithmic forecasts from I Know First. I am highly confident ADBE’s price will be notably higher than $150 after 12 months.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

Past I Know First Success With ADBE

I Know First has been bullish on ADBE shares. On January 26, 2017, I know First issued a bullish forecast for Adobe. Since the year 2012, the positive trend continued for the stock’s increase. With high profit margin and increasing subscribers, I Know First recognizes Adobe’s bright future. Since the forecast’s release, ADBE shares increased by 24.81%.

(Source: Google Finance)

This bullish forecast for ADBE was sent to I Know First subscribers on January 29, 2016. To subscribe today click here.