Tepper's Moves: Adobe Sale and Lam Research Stake Increase

Market Analysis: Recent actions by David Tepper highlight opportunities. Adobe's software business is growing despite stock decline, with a 14.6% earnings rise. Lam Research shows promising growth potential in the semiconductor sector, raising investor interest.

Date: 15-02-2025

AI Rating: 7

Overview of the Report
The report delves into the recent investment activities of David Tepper, who sold a significant stake in Adobe and increased his investment in Lam Research. Both companies have shown different financial trajectories that could impact investor decisions.

Adobe Analysis
Adobe's revenue grew by 11% year over year in the fiscal year ending November 29, 2024. This indicates a solid continued demand for its software products. However, the stock has decreased by 33% from its peak in 2021. Despite these challenges, Adobe's adjusted earnings per share (EPS) rose to $18.42, reflecting a 14.6% increase. GAAP earnings, which consider the financial impact of a $1 billion termination fee from abandoning the Figma acquisition, only grew 4.6% to $12.36. The disparity between adjusted and GAAP earnings suggests that while the company is growing, one-time costs can significantly affect traditional profitability measures.Thus, from the investor's perspective, Adobe appears to have a strong growth story, but its current stock price reflects significant market skepticism about future performance.

Lam Research Analysis
In contrast, Lam Research posted an impressive 23% growth in adjusted earnings, reaching $3.36 per share. The company is positioned favorably in the semiconductor industry, particularly with its focus on high bandwidth memory (HBM), a crucial component in AI processing. The market is projected for significant growth, expanding from $4 billion in 2023 to $130 billion by 2029, which paints a promising picture for Lam Research's future sales. Such growth in a niche market could lead to a substantial demand for Lam's products, making it an attractive investment proposition at its current valuation of 21.9 times forward-looking earnings expectations.

Conclusion
Investors might view Tepper's moves as endorsements of the potential in both firms. Adobe's established growth juxtaposed with challenges paints a mixed outlook, while Lam Research's robust growth and market positioning signal potential for strong returns. Investors should weigh these insights against current market trends when making decisions.

Stocks: ADBE LRCX