Is Adobe Inc. (ADBE) the Most Undervalued High Quality Stock to Buy According to Analysts?

Yahoo

08-03-2025

We recently published a list of . In this article, we are going to take a look at where Adobe Inc. (NASDAQ:ADBE) stands against other most undervalued high quality stocks to buy according to analysts.
In one of our recent articles, titled , we talked about how the recent tariffs have caused a slowdown in the market and are likely to cause inflation. Here's a piece from the article:
'Today, Richard Fisher, former Dallas Fed president, appeared on a CNBC interview to talk about the recent tariffs and their impact on the market. Fisher stated that a tariff is a cost factor that goes into producing and distributing a product, making it a form of tax. Business operators of all sizes have to figure out a way to protect their margins against the impact. On the other hand, the Federal Reserve has to gauge the amount of revenue it would generate from these tariffs considering it is slowing down the economy and can cause inflation as the companies will have to raise prices to maintain their margins. Moreover, Richard Fisher noted that such tariffs take a long to be digested, as businesses don't change something overnight. The only way for companies to maintain their margins without increasing prices is by increasing productivity, which again does not happen overnight and takes time.'
On March 6, Tom Lee, managing partner and head of research at Fundstrat Global Advisors appeared on a CNBC interview to talk about how the market is likely to proceed forward from here. Lee stated that he is still optimistic about the market, he acknowledged that investors are sitting out at the moment as they are trying to assess the severity of these tariffs. However as a result the market is seeing a big price correction and a decline in sentiment. Moreover, Lee noted that we also had a bad ADP jobs report and the market is going up on bad news which he believes is good for the market.
Lee explained what has happened during the six weeks essentially represents a bear market that has swept through sentiment and positioning because if we look at the hedge funds positioning it has almost gone neutral. Lee believes because of this the current and two upcoming months can be huge rally months, where the market can be rallying as much as 10% to 15%.
While answering the question of whether this slowdown is a Buy, Lee noted that the 10 best days happen every year for the market. Last year the 10 best days of the year added up to 21% to the S&P 500, excluding these 10 days the market was only up 4%. He explained that markets don't get 20% gains throughout the year, it is those 10 best days where the market rallies the most. Lee thinks that these 10 best days for 2025 are near because if the economy is near stall speed, the 'Trump Put' will come back, otherwise, the market has to unwind all this austerity. Moreover, if the job market is soft, the 'Fed Put' comes back into play, because the Fed does not want the stall speed to linger. Lee thinks these two things are going to be the positive catalysts in the next couple of weeks.
To compile the list of the 10 most undervalued high-quality stocks to buy according to analysts, we used the iShares MSCI USA Quality Factor ETF. Using the ETF we aggregated a list of high-quality stocks trading below the S&P 500's forward P/E ratio of 22 as per the Wall Street Journal. Next, we checked the analyst upside potential for each stock from CNN and ranked the stocks in ascending order of the upside potential. We have also added the number of hedge funds holding each stock, sourced from Insider Monkey's Q4 hedge funds database. Please note that the data was collected on March 6, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points ().
A team of engineers and scientists collaborating at a workstation surrounded by their applications and solutions.Adobe Inc. (NASDAQ:ADBE) is a global technology giant that helps people and businesses create, manage, and deliver digital content across various platforms. On March 5, Barclays analyst Saket Kalia maintained a Buy rating on the stock with a price target of $567.
During the fiscal fourth quarter of 2024, the company achieved a record revenue of $21.51 billion, marking an 11% year-over-year growth both as reported and in constant currency. The Digital Segment revenue was one of the top performers with revenue increasing 12% year-over-year to reach $15.86 billion. Moreover, net new Digital Media Annualized Recurring Revenue exceeded $2.0 billion, marking a significant milestone for the company.
Adobe Inc. (NASDAQ:ADBE) is at the forefront of AI innovations the company released its Adobe Firefly, which allows users to create stunning visuals, text effects, and illustrations with simple text prompts. It has expanded capabilities for real-time AI-assisted edits, video content generation, and 3D asset creation. Polen Focus Growth Strategy in its Q4 2024 investor letter stated that the company came under pressure due to delays in effectively monetizing its generative AI Firefly. However, the fund remains optimistic that even if other open-source platforms develop generative AI companies and professionals will still need Adobe Inc. (NASDAQ:ADBE) to edit content. It is one of the most undervalued high-quality stocks to buy according to analysts.
Polen Focus Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q4 2024 investor letter:
'Zoetis and Adobe Inc. (NASDAQ:ADBE) were also notable absolute detractors. Adobe is another holding that's come under pressure this year due to concerns about delays in the company's ability to monetize its generative AI Firefly offering. Our research suggests that even if open-source generative AI tools proliferate, creative professionals will still need to curate and edit that content in Adobe tools.'
Overall, ADBE ranks 4th on our list of most undervalued high quality stocks to buy according to analysts. While we acknowledge the potential of ADBE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ADBE but that trades at less than 5 times its earnings, check out our report about the .
READ NEXT: 20 Best AI Stocks To Buy Now and .
Disclosure: None. This article is originally published at Insider Monkey.