Adobe has been among the hardest-hit names in the recent software downturn, with its share price trading at fresh 52-week lows after a broad market rotation out of growth and into defensive sectors. According to DataTrek’s Nicholas Colas and Jessica Rabe, stocks making new lows tend to persistently underperform, underscoring the risk of “bottom feeding.” Academic studies cited by the strategists show that a long-short momentum strategy from 1990 to 2024 generated positive average annual returns by buying names with strong price momentum and shorting those with weak momentum. Investors are therefore advised to wait for signs of price stabilization before considering exposure to Adobe, given the degree of negative momentum it currently exhibits relative to the S&P 500.

Despite the recent pullback, Adobe’s subscription business remains a model of recurring-revenue strength, with 96% of total revenue derived from long-term contracts and a net dollar retention rate of 130%, according to a recent SoFi report. High operating margins in excess of 30% and growing performance obligations on the balance sheet point to strong revenue visibility over the next 12 to 24 months. Adobe has also deepened its strategic integration with leading generative AI models, introducing usage-based monetization through generative credits that provide a potential upside lever as enterprise adoption of AI accelerates. These structural advantages reinforce Adobe’s competitive moat and support the company’s long-term growth trajectory, even as short-term sentiment remains challenged.