The company has acquired Slack, Tableau, MuleSoft, and many others. Salesforce ( CRM) is a prime example of a company successfully building out acquisitions. Sometimes purchasing a ready-made product for a premium price is the best option. Adobe has spent $8.9 billion on R&D since 2019. Internal R&D is costly, and there is no guarantee that successful products will develop. DevelopĬompanies spend billions researching and developing (R&D) new products. The $20 billion price seems ridiculous now, but it may seem like a bargain in five years. Its 150% net retention rate is incredible and indicates that growth will continue rapidly.įigma is also cash-flow positive, so it won't be a drain on resources. It is expected to pass $400 million in annual recurring revenue (ARR) in 2022 on 100% sales growth and a 90% gross margin. It is a fantastic product by all accounts. Reason #2: Figmaįigma didn't receive a $10 billion valuation in 2021 for nothing. $20 billion is steep, but it may cost much more to do nothing. It would likely attract more during an IPO, becoming an incredibly well-funded competitor in Adobe's creative space. The company drew a $10 billion valuation in 2021. If Adobe doesn't purchase Figma, another software giant might, and this could significantly affect Adobe's future profits. Its recent $69 billion purchase of Activision Blizzard ( ATVI) is under regulatory review. Microsoft is no stranger to massive acquisitions.Adobe can't afford to allow Figma to continue infringing on its space with its 100% revenue growth expected in 2022.The decision to purchase Figma for $20 billion becomes apparent through this lens. In fact, Figma's customer base is a who's who of corporate tech companies, from Netflix ( NFLX) to Spotify ( SPOT) to Alphabet. Integration with Microsoft Teams app was also recently added. Microsoft employees have been using Figma for years and apparently don't just like it they LOVE it. While they are rivals, Microsoft is an Adobe customer, and they have formed strategic partnerships and integrations over the years. Both are among the largest software companies in the world by market cap. Microsoft ( MSFT) and Adobe have enjoyed a healthy relationship for years. Here are three reasons the Figma acquisition and stock price look compelling. Dollar-cost averaging could also be a wise choice because the price is still historically low even after the rally. This looks prescient after last week's rally however, the rally could fizzle quickly, and this is a long-term play.Īnother dip in Adobe stock should be tempting to long-term investors who understand the long-term implications of bringing Figma on board. The stock reached its 52-week low of $275 per share in late September.Īfter researching the stock's valuation and the nuances of the Figma acquisition, I averaged into a near-full position with an average cost of $287 per share. Of course, the stock was already trading under $300 per share as these rolled in. Numerous analysts rushed to lower price targets and cut ratings. The stock was already down 35% on the year before the announcement and cratered on the news, as shown below. For those interested in more detail, check out this link. Multiple users can edit in real-time, similar to Google Docs ( GOOG, GOOGL). Many professionals prefer Figma because of its superior collaboration functionality. The company announced it was acquiring online design enterprise Figma for $20 billion, about half in cash and half in stock.įigma is a cloud-based design software that competes directly with Adobe XD. Software giant Adobe ( NASDAQ: ADBE) released pedestrian earnings on September 15th, 2022, and dropped a bombshell on the market.
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