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Adobe Inc. (ADBE) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Adobe Inc. (ADBE)

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Intrinsic Value (DCF)

Current$304.44
→
Intrinsic$466.44
+53%
$313.69$466.44$770.29
Market implies 5% growth for 5 years
DCF analysis suggests ADBE could have 53% upside at 16% growth — verify assumptions match your view.
At $304, the market prices in only 5% growth — below historical 16%, suggesting low expectations.
Range: Bear $314 → Bull $770. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →12%14%16%18%
8%$580$630$683$740
10%$398$431$466$504
12%$302$326$352$380
14%$242$261$282$303

Bull Case

  • Bull case ($770) offers 153% upside at 19% growth, 8% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (5%) ≤ historical CAGR (16%)

Bear Case

  • Bear case ($314) with 12% growth, 12% discount rate
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5-Year Free Cash Flow Projection

Year 1$9.04B
Year 2$10.45B
Year 3$12.07B
Year 4$13.95B
Year 5$16.12B
Terminal$255.40B

📐 Model Inputs

Growth Rate15.6%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$7.82BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is ADBE stock undervalued or overvalued?
🟢 UNDERVALUED

ADBE trades at $304.44 vs. our DCF-derived intrinsic value of $456.42, implying +36% upside. At a 9.5% WACC and 15.6% projected FCF growth, the market appears to be underpricing the present value of ADBE's future cash flows. The bear case ($307.02) still suggests upside, providing margin of safety.

What is ADBE's intrinsic value?

Using a 5-year DCF model: Base FCF of $7.82B, projected at 15.6% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-1.56B net debt and dividing by 0.45B shares: Bear $307.02 | Base $456.42 | Bull $675.40. Current price $304.44 implies +36% to base case.

How is ADBE's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 15.6% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($203.83B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.