ADBE Stock Is Down 43% From Its Peak — Michael Burry Just Bought It and Analysts Think It Could Double

Some investors, probably many of them, purchased Adobe at $700 in late 2021 and have been watching it gradually decline toward $239 for the better part of four years. The business hasn’t collapsed. Revenue continues to rise. Q1 2026 exceeded forecasts with $6.4 billion, up almost 12% year over year. $17.16 is the EPS. The P/E ratio is 13.95 times, which would seem perfectly normal for a local bank or grocery store chain, but it feels almost bewildering for a software company with Adobe’s market position and gross margins. From its 52-week high, the stock has dropped 43%. Nevertheless, the company is operating by the majority of accepted standards. The market hasn’t been able to resolve the tension in that gap, which has drawn a certain type of investor—the type who enjoys the scent of panic surrounding a long-lasting franchise.

Investor Michael Burry, who gained notoriety for his successful wager against the 2008 housing market, recently started investing in Adobe. This move sparked the usual flurry of Reddit discussion and YouTube analysis that usually follows his revelations. In essence, he characterized it as a situation involving deep values. The reasoning is straightforward: a business with $17 in earnings per share is trading at 14 times those earnings, there is an implied upside of 37% to 43% to analyst fair value estimates, and the product suite is so ingrained in professional workflows that switching costs are actually high. The current price appears to be pricing in something more akin to terminal decline than a brief rough patch if you think Adobe’s business is structurally sound.

The problem, which is a real one, is that multiple legitimate threats to Adobe’s business have emerged at the same time, reducing what was previously an almost unbeatable competitive position to something that needs more aggressive defense. From being a lighthearted consumer design tool, Canva has developed into a product that business teams take seriously. For a whole generation of product teams, Figma—which Adobe attempted and failed to purchase for $20 billion before regulators blocked the deal—has become the standard interface design tool.

The market for stock photography and image creation has been upended by Midjourney and a number of other AI image generation platforms, which has an impact on both Adobe Stock and the idea that Photoshop is required for specific creative processes. None of these would be concerning on their own. Together, they have produced a narrative of competitive erosion that has been priced into the stock with something akin to prejudice, coinciding with a wider market rotation away from high-multiple software stocks.

The market hasn’t fully priced in or explained away the additional degree of uncertainty brought about by the leadership change. Since December 2007, Shantanu Narayen has been in charge of Adobe, essentially overseeing the company’s transition from a desktop software provider to a cloud subscription company.

The transition to Creative Cloud, the acquisition of Marketo, the Workfront agreement, and the unrelenting growth of the document cloud business all occurred during Narayen’s tenure, and they all contributed to the stock rising by about 30 times between 2011 and 2021. A company that is going through one of the most uncertain times in its history loses a known quantity due to his planned retirement. The market seems to be viewing this as a risk rather than an opportunity, and it is genuinely unclear if the successor will be able to maintain the same rate of monetization and strategic clarity.

The bears might be underestimating the extent to which Adobe’s products are ingrained in the tangible world of creative work. Adobe products are not optional tools in design studios, marketing firms, and publishing houses worldwide; rather, they are the foundation upon which everything else is built. Similar to how a journalist opens a word processor in the morning, a Chicago graphic designer opens Illustrator automatically. Regardless of the availability of alternatives, the institutional inertia surrounding Adobe’s suite is enormous and does not rapidly erode. In an effort to turn that installed base into an AI adoption advantage, the company has expanded its partnership with NVIDIA around Firefly Foundry and AI agents. The claim is that Adobe’s value is found in end-to-end, enterprise-grade workflows that manage content control, legal governance, and brand compliance in ways that standalone AI tools just cannot.

As this develops, it seems like Adobe is going through something akin to what Microsoft went through between 2014 and 2017—a time when the company seemed to be losing the narrative to competitors who were moving more quickly, even though the underlying business remained structurally sound. Before the market adjusted, Microsoft’s stock languished for years. After that, it rose to become the world’s most valuable company. It’s not a prediction, that parallel. Adobe is a distinct business with distinct risks. However, the pessimism ingrained in the current price seems worth carefully considering before accepting it as final, given that the company still generates billions in free cash flow and has 3 trillion PDF files in active worldwide circulation at a P/E of 14.