Getty Images and Shutterstock Join Forces in $3.7 Billion Merger

Investors React Positively While Adobe Faces Increased Competition

The stock photography giants, Getty Images and Shutterstock, are merging to form a combined company valued at $3.7 billion. Getty shareholders will retain 55% ownership of this new entity, which will be led by Getty’s current CEO, Craig Peters. This announcement resulted in a notable surge in stock prices for both companies; GETY jumped by 25% and SSTK increased by 14% on Tuesday, January 7. Analysts predict that the merger could create significant cost savings, anticipated to range between $150 million and $200 million annually. The pairing positions them as a stronger competitor against Adobe (NASDAQ:ADBE).

Adobe is well-known for its range of stock images, graphics, and videos; however, its collection is smaller than that of Getty and Shutterstock, offering just over 300 million assets compared to their 470 million each. As the demand for visual content grows, particularly with the rise of generative AI, Adobe has begun integrating AI-generated imagery and text-to-image features through its Firefly AI tool. Getty is also exploring similar advancements in artificial intelligence.

Adobe’s stock performance has been shaky lately. It fell from over $520 in early December 2024 to about $420 currently, driven in part by a disappointing fourth-quarter earnings report and concerns regarding its AI initiatives, which have not yet delivered expected results. For investors looking for stability, the High-Quality Portfolio is a promising option, having outperformed the S&P 500 with returns exceeding 91% since its inception.

In its fiscal year ending in November 2024, Adobe reported an 11% year-over-year increase in revenue, totaling $21.5 billion. The digital media segment saw sales grow by 12% to $15.9 billion, while document cloud sales rose 18% to $3.2 billion. Adobe has benefited from customer transitions to more expensive subscription plans, boosting the average revenue per user. Although the company appears stable in its revenue streams, the anticipated growth from AI has yet to manifest adequately.

Reviewing ADBE’s stock trends over the past four years shows significant volatility. The stock returns were 13% in 2021, -41% in 2022, 77% in 2023, and -25% in 2024. Compared to the S&P 500, Adobe has experienced more erratic performance. In contrast, the Trefis High Quality Portfolio, comprising 30 stocks, has yielded better returns with reduced risk, showing less price fluctuation than the S&P 500.

As ADBE faces the possibility of underperforming again, similar to its past years, one must wonder whether it can recover. Increased competition from Getty and Shutterstock, alongside slower AI-driven revenue growth, raises questions about its future. Currently priced around $420, ADBE trades at 9 times trailing revenues, below its historical average P/S ratio of 15. A modest decline in this metric may be justified, yet the gap compared to its average appears overly broad and could narrow in subsequent quarters. Despite Adobe’s lack of substantial growth from its AI investments, the potential for enhanced creativity and productivity tools could increase user engagement. For these reasons, many analysts believe that investing in ADBE stock during this dip could lead to robust long-term gains.

To further evaluate ADBE’s market position, it’s important to compare how Adobe’s Peers are performing on critical financial metrics. A deeper look at comparative data across various industries can be found in Peer Comparisons.

[1] Returns as of 1/8/2025
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.