Figma and Adobe: Which Tech Company's Shares Are More Worth Investing In?
In the world of tech, mergers and acquisitions are not uncommon. However, one potential union that never came to fruition was between Figma and Adobe. The deal fell through due to competition-related concerns and challenges related to merger control and competition law.
Figma, a design software company, has made a name for itself by focusing on ease of use and collaboration. Its software is accessible, with plans starting at less than $20 per month, making it an attractive option for many. In its most recent quarter, Figma posted an operating profit of just under $2.1 million and reported sales of $249.6 million, an impressive 41% year-over-year increase.
On the other hand, Adobe, represented by NASDAQ: ADBE, is a tech giant known for its high-quality software, particularly in the field of photo editing. Its software is the default option for many professionals, and its Creative Cloud Pro option, while more expensive, offers a comprehensive suite of tools. Adobe's stock has seen a 35% drop in value over the past year, offering potential investors a margin of safety.
Despite the drop in stock price, Adobe's financials remain strong. In its most recent quarter, which ended on Aug. 29, Adobe reported revenue of approximately $5.52 billion, an 11% year-over-year increase. The company's operating income for the quarter totaled $2.2 billion, representing 36% of revenue. Adobe's high profit margins could potentially allow the company to reduce prices if needed to protect market share and still produce solid profits.
Adobe has also incorporated AI into its tools and software, further enhancing its offerings. The company's stock is trading at a forward price-to-earnings multiple of 15 and a price-to-earnings-growth multiple of just 1, making it an attractive investment for some. The day's range for Adobe's stock is between $365.88 and $370.86, and the 52-week range is between $330.04 and $557.90.
Comparatively, Figma's stock is trading at $58.39, with a change of 6.59% on the day. The company's market cap is approximately $29 billion, while Adobe is worth nearly $150 billion. Figma's net dollar retention rate is 129% for customers with annual recurring revenue of $10,000 or more, indicating strong customer loyalty.
In terms of market cap, Adobe dwarfs Figma, but the smaller company's focus on collaboration and accessibility could make it an interesting acquisition target in the future. However, the challenges that derailed the potential merger between the two companies remain, and it's unclear if or when such a deal might be revived.
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