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Both of these companies have strong global brands that were thriving but were suffering prior to the financial crisis in 2008. However, with a change in leadership and new focus, they launched a turnaround and appear stronger than ever in 2022 and could provide much-needed stability in a turbulent market.
The bull and bear case for Adobe stock:
Adobe Inc. (NASDAQ: ADBE) is a software technology company founded in 1982 and is a digital media juggernaut today with a range of products such as Adobe Photoshop, PDF, and many more.
Adobe has been led by CEO Shantanu Narayen since 2007 and guided the company’s transition from licensing software to a subscription model. This pivot was a risky one but has turned out to be hugely successful.
It continues to produce strong results, and in fiscal 2021, revenue reached a record $15.79 billion, with approximately 92% of its revenue subscription-based, leading to greater revenue visibility. It is also profitable, with a net income of $4.82 billion in 2021.
The company operates in what it believes is a $205 billion total addressable market as the world continues to shift digitally. Its CEO recently stated that Adobe is “well-positioned for future growth in the years ahead”, and its history of innovation would support this.
One concern is the guidance provided in the latest quarter, which came in lower than expected, with revenue growth forecast to be roughly 13% for fiscal 2022. It also faces competition from other players such as Salesforce, Microsoft, and smaller players in several niches.
The bull and bear case for Starbucks stock:
Starbucks (NASDAQ: SBUX) is a global megabrand, and the coffee company’s stock has returned over 32,000% since its IPO in 1992. However, it has not always been plain sailing. The company was venturing into the music industry and lost sight of its coffee brand, causing the stock to fall and the eventual return of its founder, Howard Schultz in 2008.
Schultz brought a focus back to Starbucks, and fast forward more than a decade, Starbucks operates roughly 33,000 stores globally. It reported $29.1 billion in revenue in 2021, increasing 24% year-over-year, while earnings per share hit $3.54 compared to $0.79 a year prior.
The company has significant pricing power due to its brand strength and customer loyalty. Through its app and perks with its rewards program, it helps to drive engagement and improve the customer experience.
In 2021 members of its digital Starbucks Rewards program reached 24.8 million.
Starbucks continues to grow and plans to open 2,000 new stores in 2022, which it believes will contribute “meaningfully” to its revenue. Over three-quarters of these new stores will be opened outside the U.S. This bodes well for the company going forward as international stores typically have better economics than U.S. stores.
In recent times, one concerning news headline is that employees in the only unionized Starbucks store in Buffalo, New York, staged a walkout protest due to what it claims to be unsafe working conditions. However, management plans to raise employees’ wages in 2022 may alleviate investors’ concerns somewhat.
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