Market Overview - Investors are focusing on aligning portfolios with undervalued businesses to mitigate market volatility and achieve strong first-quarter performance [1][2] - The market presents rare opportunities in undervalued stocks across sectors like technology and consumer staples [2][3] Technology Sector - Adobe Inc (NASDAQ: ADBE) is trading at a significant discount, representing one of the best opportunities in the technology sector [3] - Adobe's stock is currently priced at $419 58, down 0 72% from its previous close, and trades at 66% of its 52-week high of $638 25 [3][7] - Wall Street analysts maintain a consensus price target of $575 85 for Adobe, implying a 37 4% upside from current levels [7] - Adobe has transitioned to a subscription-based business model, bundling its creator software products into monthly subscriptions, which has increased financial predictability and stability [6][7] - The company holds a near-monopoly in its niche, with few competitors offering a comparable all-in-one package [7] Semiconductor Industry - Advanced Micro Devices Inc (NASDAQ: AMD) is positioned to benefit from the semiconductor industry's growth, particularly in artificial intelligence [3][9] - AMD's stock is currently priced at $121 84, down 4 31% from its previous close, and trades at 54% of its 52-week high of $227 30 [8][10] - Wall Street analysts have a consensus price target of $187 85 for AMD, implying a 54 2% upside from current levels [10] - The company has been overshadowed by NVIDIA (NASDAQ: NVDA), which trades at 92% of its 52-week high, creating a significant valuation gap [10][11] - AMD's projected earnings growth of 63 78% makes it an attractive investment compared to NVIDIA's 17 5% upside potential [10][11] Consumer Staples Sector - Hershey Co (NYSE: HSY) is trading at a discount, offering a compelling value play in the consumer staples sector [3][13] - Hershey's stock is currently priced at $162 51, down 1 82% from its previous close, and trades at 77% of its 52-week high of $211 92 [13][14] - The company has a strong return on invested capital (ROIC) of 23%, which supports long-term wealth compounding [13] - Institutional investors, including State Street, have increased their stakes in Hershey, with State Street's position now valued at $1 3 billion, representing 3 5% ownership [16] - Wall Street analysts project a 77 2% increase in earnings per share (EPS) for Hershey, from $1 27 to $2 25 over the next 12 months [17] Analyst Ratings and Market Sentiment - Adobe has a MarketRank™ in the 98th percentile, with a "Moderate Buy" rating and a 37 2% upside potential [5][6] - AMD has a MarketRank™ in the 99th percentile, with a "Moderate Buy" rating and a 54 2% upside potential [10] - Hershey has a MarketRank™ in the 86th percentile, with a "Reduce" rating and a 12 1% upside potential [15]

Group 1: Merger Announcement - Getty Images and Shutterstock have agreed to merge, creating a company valued at $3.7 billion, with Getty shareholders owning 55% of the new entity [1] - Craig Peters, the current CEO of Getty, will lead the combined company, which is expected to generate annual cost savings of $150 million to $200 million [1] - Following the merger announcement, GETY stock rose by 25% and SSTK stock increased by 14% on January 7 [1] Group 2: Competitive Landscape - The combined entity of Getty and Shutterstock will create a stronger competitor against Adobe, which has a smaller collection of over 300 million assets compared to the 470 million assets each of Getty and Shutterstock [2] - The demand for images and videos is increasing due to the adoption of generative AI, with Adobe already offering AI-generated images through its Firefly AI tool [2] Group 3: Adobe's Financial Performance - Adobe's revenue increased by 11% year-over-year to $21.5 billion in fiscal 2024, with the digital media segment growing by 12% to $15.9 billion [4] - Despite the growth in subscription revenues, Adobe's AI advancements have not yet translated into significant revenue growth [4] Group 4: Stock Performance and Valuation - Adobe's stock has experienced volatility, with returns of 13% in 2021, -41% in 2022, 77% in 2023, and -25% in 2024 [5] - Currently, Adobe's stock is trading at approximately $420, which is 9 times trailing revenues, compared to its average price-to-sales ratio of 15 times over the past five years, indicating potential undervaluation [6]

Background and Expertise - The individual has over 10 years of experience as a software engineer and more than 5 years dedicated to stock research and investing [1] - A strong interest in analyzing stocks and developing long-term investment strategies is driven by a background in computer science [1] - The focus is primarily on long-term investment picks [1] Disclosure and Independence - No stock, option, or similar derivative positions are held in any of the mentioned companies, and there are no plans to initiate such positions within the next 72 hours [2] - The article expresses the individual's own opinions and is not influenced by any business relationships with the mentioned companies [2] - The individual is not receiving compensation for the article other than from Seeking Alpha [2] Seeking Alpha's Position - Past performance is not indicative of future results, and no specific investment recommendations are provided [3] - The views expressed may not reflect those of Seeking Alpha as a whole [3] - Seeking Alpha is not a licensed securities dealer, broker, or US investment adviser, and its analysts may not be licensed or certified by any regulatory body [3]

Online Spending Growth - Online spending during the holiday season (Nov 1 to Dec 31) increased by 8.7% year-over-year, reaching $241.4 billion [1] - The growth was driven by increased demand rather than higher prices, as e-commerce prices have fallen for 27 consecutive months [2] - Deep discounts played a significant role, with a 1% drop in typical prices leading to a 1% increase in demand, resulting in an additional $2.25 billion in online spending [5] Retail Industry Performance - The strong e-commerce results are a positive sign for the retail industry, with major retailers like Walmart, Target, and Macy's set to report their fiscal Q4 results in late February [3] - Overall U.S. retail sales (excluding automotive) for the holiday season (Nov 1 to Dec 24) rose 3.8% year-over-year, according to Mastercard SpendingPulse [4] Consumer Behavior Trends - Consumers are adopting an "event-ized buying" pattern, waiting for sales events like Amazon Prime Day, President's Day, and Memorial Day to make nonessential purchases [6] - Shoppers tend to overindex their spending during specific moments when they perceive value, leading to growth spikes followed by periods of slower growth [7] Top Performing Categories - Electronics, apparel, and furniture/home goods were the top three categories, contributing to 54% of total online spending [8] - Groceries saw the highest year-over-year growth at nearly 13%, reaching $21.5 billion, followed by cosmetics at 12.2% growth to $7.7 billion [8] - Electronics had the highest discounts at 30.1%, followed by toys (28%), TVs (24.2%), and apparel (23.2%) [7]

AI Industry Overview - AI advancements drove stock prices of major companies higher in 2024, but not all AI innovators benefited equally [1] - Stock prices are influenced by financial results exceeding forecasts or management expectations surpassing investor sentiment [2] - Two companies, AMD and Adobe, made significant AI strides but saw stock declines due to delayed payoff expectations [3] Advanced Micro Devices (AMD) - AMD has been secondary to Nvidia in GPU development for AI applications but holds a strong position in AI data center chips [4] - AMD secured deals with major tech companies like Oracle, Microsoft, and Meta, indicating a strategy to counter Nvidia's dominance [5] - AMD's AI accelerators are more cost-effective for inference performance compared to Nvidia's, making them attractive for running AI applications [6] - AMD's data center revenue grew 122% YoY in Q3 2024, outperforming Nvidia's 112% growth in the same segment [7] - AMD is accelerating AI chip development, with the Instinct MI325X successor due in less than a year and the MI400 line expected in early 2026 [8] - AMD's forward P/E ratio of 24 suggests a relative bargain, with analysts expecting 54% EPS growth in 2025 [9] Adobe - Adobe enhanced its AI-powered features in 2024, notably with GenStudio, which integrates creative and marketing software for AI-driven campaigns [10] - Adobe's focus on commercial-safe generative AI provides a competitive edge, ensuring professional creatives avoid copyright or trademark issues [11] - Adobe Express, a free software, has attracted more users, with strong conversion rates to paid options due to advanced AI features [12] - Adobe implemented price increases and a credit-based system for generative AI features, driving incremental revenue [13] - Adobe's Digital Media ARR increased by $2 billion in 2024, with total revenue growing 11% YoY, while cost of revenue remained stable [14] - Adobe's 2025 outlook projects 11% ARR growth and EPS estimates of $20.20 to $20.50, below analyst expectations [15] - Adobe is well-positioned for steady revenue growth and margin expansion, with shares trading at less than 22 times the midpoint of its 2025 EPS outlook [16]

Company Performance and Valuation - Adobe's shares fell by 13.8% in December due to poorly received Q4 earnings and guidance [1] - The company has strong financial metrics: 89% gross margin, 46.6% adjusted operating margin, 36.6% FCF margin, and 13% YoY growth in digital media ARR for 2024 [3] - Adobe generated nearly $7.9 billion in FCF in 2024 and trades at 24.6 times 2024 FCF, which is not considered expensive given its scalable business model [4] Earnings and Guidance - Adobe's 2025 guidance projects 11% growth in digital media ARR, which disappointed Wall Street analysts who expected more growth [5] - Analysts anticipated higher growth due to Adobe's increasing monetization of AI solutions integrated into its products [5] AI Strategy and Market Position - Adobe's AI solution, Firefly, is currently free to encourage adoption, with premium options available for a fee [6] - Some investors are disappointed with Adobe's approach to monetizing its AI applications, seeing it as a missed growth opportunity [6] - The company faces fierce competition in the creative space, and aggressive pricing of AI solutions could lead to subscriber loss [7] - There is a debate about whether AI tools could reduce the need for creative personnel at Adobe's key customers, potentially decreasing demand for its software [7]

Technical Analysis - Warren Buffett advises to be fearful when others are greedy and greedy when others are fearful [1] - The Relative Strength Index (RSI) measures momentum on a scale of zero to 100, with a stock considered oversold if the RSI reading falls below 30 [1] Adobe (ADBE) Stock Performance - Adobe shares entered oversold territory with an RSI reading of 29.4 on Monday [3] - The stock traded as low as $438.57 per share, compared to its 52-week low of $432.47 and high of $638.25 [3] - The last trade price was $442.73 [3] - The current RSI reading of the S&P 500 ETF (SPY) is 40.9 [3] Investment Opportunity - A bullish investor could view Adobe's 29.4 RSI reading as a sign that recent heavy selling is exhausting itself, potentially indicating a buy-side entry point [3]

Core Viewpoint - Adobe's stock is currently viewed as undervalued, trading at 68% of its 52-week high, with analysts maintaining a bullish outlook and a price target of $645 by December 2024 [2][3]. Group 1: Financial Performance and Valuation - Adobe's management has initiated a stock buyback of up to $2.5 billion, signaling confidence in the stock's current valuation [3]. - The company operates on a subscription model, with over 90% of its revenue derived from subscription payments, providing a stable revenue stream [11]. - Adobe's return on invested capital (ROIC) stands at 31.6%, indicating strong financial management and potential for wealth compounding [13]. Group 2: Market Sentiment and Analyst Ratings - Analysts have a "Moderate Buy" rating for Adobe, with a projected upside of 30.6% [7]. - There has been a 10.9% decline in the company's short interest over the past month, suggesting a shift in market sentiment towards a more positive outlook [8]. - Geode Capital Management increased its holdings in Adobe by 1.4%, reflecting confidence in the company's future performance [19]. Group 3: Industry Context and Trends - The technology sector, particularly in artificial intelligence and digital transformation, has garnered significant investor interest, with Adobe positioned to benefit from these trends [4][21]. - As the global economy becomes increasingly digitized, Adobe's software offerings are expected to play a crucial role in the future economy [21].

Company Overview - Yiannis Zourmpanos is the founder of Yiazou IQ, an AI-driven stock research platform that provides comprehensive stock reports [1] - The platform focuses on GARP/Value stocks, targeting high-quality businesses with strong moats and significant growth potential [1] - The investment style prioritizes fundamentals, seeking stocks trading at a discount to intrinsic value with a clear margin of safety [1] - The long-term investment approach spans 5-7 years, aiming for wealth accumulation through compounding while emphasizing downside protection [1] Investment Strategy - The strategy includes taking contrarian views during market uncertainties to capitalize on potential opportunities [1] - The focus is on reasonably priced businesses with strong competitive advantages and growth potential [1] Professional Background - Yiannis Zourmpanos has extensive experience in external and internal auditing and consulting, having worked at Deloitte and KPMG [1] - He holds a Chartered Certified Accountant designation and is a Fellow Member of ACCA Global [1] - He has BSc and MSc degrees from U K business schools, further solidifying his expertise in finance and investment [1]

Group 1: Meta Platforms - Meta is trading near an all-time high with a forward P/E of 26, and analysts project earnings growth of nearly 18% annually over the long term, resulting in a PEG ratio of 1.4, indicating it is a bargain [3][6] - The company is expected to generate approximately $163 billion in revenue this year, reflecting a 21% increase from 2023, with about one-third of that as free cash flow [6] - Meta is heavily investing in artificial intelligence (AI), which could provide additional growth opportunities, despite its AI segment currently not being profitable [10] Group 2: Adobe - Adobe has annual revenue of $21.5 billion, converting over 36% into free cash flow, but its stock has declined due to emerging competitive threats and concerns about AI potentially replacing its products [7][12] - The company is integrating AI technology into its offerings, and while AI can generate images, it is not yet capable of fully replacing Adobe's established tools [4][12] - Adobe's revenue is still growing at nearly 10%, with analysts expecting annualized earnings growth of 15% over the long term, resulting in a PEG ratio of 1.5, suggesting it remains an attractive investment opportunity [12]