Both Adobe(NASDAQ: ADBE) and Slack (NYSE: WORK) have benefited from pandemic-driven digitization, and each has outperformed the broader market over the last 12 months. But while Adobe is up 33%, shares of Slack have surged 69%.
Tour the basics of the Slack app platform. Take a trip through the creation and installation of your first app. Get started building a Slack app, integration, or bot. Adobe Creative Cloud integrates with Slack to streamline creative collaboration. Share smart links to assets in Creative Cloud that unfurl with rich and help. Explore Slack Casual designed by Rian Hughes at Adobe Fonts. A decorative typeface with 4 styles, available from Adobe Fonts for sync and web use. Adobe Fonts is the easiest way to bring great type into your workflow, wherever you are.
However, in December 2020, salesforce.com(NYSE: CRM) announced that it will acquire the collaboration specialist, though the deal isn't expected to close for another few months. That makes this showdown a little more complex (and interesting). So which one is the better buy today?
Adobe: The creativity giant
Adobe's business focuses on three strategic growth areas: digital documents, creativity, and customer experience. Given the global push toward digital solutions, management estimates the company's market opportunity will reach $147 billion by 2023.
Adobe Creative Cloud includes many well-known applications like Photoshop for image editing and Dreamweaver for website design, both of which are industry-leading solutions. But Adobe's more recent innovations have also gained traction. For instance, Adobe Spark helps brands and influencers create high-quality social media content. This ability to adapt as new media formats arise is an indicator of a well-managed business.
Popular Searches
Adobe Experience Cloud builds on its Creative Cloud solutions, helping brands blend content with>© Getty Images A digital network of connected person icons.
Both Microsoft and Slack have a strong presence in the business of instant messaging and internal communications markets, though Slack has a greater share of small and mid-market clients, and Microsoft Teams is more common with larger enterprises. But Microsoft's ability to bundle Teams with Microsoft 365 subscriptions gives the company a big advantage. It's much simpler for clients to use a product they already have, and many businesses using Microsoft 365 already have Teams.
Despite this, Salesforce CEO Marc Benioff is optimistic about the merger. The company plans to revamp its Salesforce Customer 360 platform, making Slack the new user interface. Salesforce will also integrate Slack's functionality into its own customer relationship management (CRM) software, making it easier for employees, customers, and partners to connect and communicate. This could strengthen Salesforce's already-strong position in various markets, from customer service and sales to marketing and analytics. In fact, Salesforce estimates that the acquisition will drive revenue growth to $50 billion by fiscal 2026.
Like Adobe, Salesforce is a well-run business with a big market opportunity -- $175 billion by 2025, according to management. Moreover, Salesforce generates more revenue and is growing more quickly than Adobe, though its operating margin is considerably lower. In fact, over the last five years, the company's operating margin has never topped 6%. As a result, Salesforce is much less profitable than Adobe.
Metric | 2016 | Q3 2021 (TTM) | Change |
|---|---|---|---|
Revenue | $6.7 billion | $20.3 billion | 204% |
Free Cash Flow | $962 million | $3.6 billion | 270% |
Data source: Salesforce SEC Filings. Note: Q3 2021 ended Oct. 31, 2020. TTM = trailing 12 months.
Investors should watch the Salesforce and Slack merger closely. Blending two businesses can be tricky, but it can also create revenue synergies and operating efficiencies. Moreover, Salesforce acquired Tableau in 2019 to boost its analytics capabilities, and so far that merger has been a success. If the company can pull off a repeat here, it could help supercharge growth.
The final word
In a contest between Adobe and Slack, Adobe wins. Slack has a sticky product and a growing user base, but it doesn't make sense to buy the stock now, since the share price of Salesforce is the only variable. Moreover, Adobe has an enormous runway for growth, and the company's industry-leading software tools and highly profitable business set Adobe up for long-term success.
That being said, Salesforce is also an innovative, quickly growing business, and the acquisition of Slack could unlock new opportunities for the company. For that reason, I don't think investors can go wrong picking up a few shares of both Adobe and Salesforce.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine owns shares of Adobe Systems. The Motley Fool owns shares of and recommends Adobe Systems, Microsoft, Salesforce.com, and Slack Technologies. The Motley Fool has a disclosure policy.
SPONSORED:10 stocks we like better than Salesforce.com
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Salesforce.com wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Adobe Analytics Slack Integration
*Stock Advisor returns as of November 20, 2020