Quick updates on Adobe, Peloton Interactive, Starbucks, Intel, and Southwest Airlines

March 17, 2025

As I've written countless times, one key to successful investing is what the late Charlie Munger once called "sit-on-your-ass investing"...

In other words, make as few trades as possible so you can let your winners run and profit from the magic of long-term compounding.

But if you're only, say, making an average of one trade a month (sometimes months go by between trades in my personal account), what should you be doing the rest of the time?

The answer is simple: Keep working hard to stay on a steep learning curve so you can be prepared to act quickly when opportunities present themselves... because often they're fleeting.

For example, look at how quickly markets rallied after their lows in late March 2020 during the COVID-19 crash or in early March 2009 during the global financial crisis.

So today I'm going to give you four examples of the type of day-to-day reading I do to keep abreast of stocks that are on my radar screen – and which I've discussed here in my daily e-mails – but I haven't pounded the table on to buy.

But they could be compelling enough someday, so let's get up to speed on the latest developments...

1) First let's look at software maker Adobe (ADBE). I took a first look at it in my September 23 e-mail and then a closer look on October 9, in which I concluded:

... if I had bought the stock a couple of years ago at the lows around $300 per share as part of a long-term portfolio of super-high-quality businesses, I would be very comfortable holding it at these levels because I think the stock will do a bit better than the market over, say, the next five years.

But the bar is a lot higher when I think about adding a new position...

Before doing so, I would have to be almost certain that other investors are making a huge mistake in assessing the future of a business such that its stock is really cheap and, therefore, it'll do a lot – not a bit – better than the market.

In short, to quote an old friend of mine, I would need to be "trembling with greed."

Adobe met this test two years ago when its forward [price-to-earnings (P/E) multiple] dipped below 20... but it doesn't today. So I'm going to put the stock on my "bench" and hope a better buying opportunity comes along at some point in the future.

That day, Adobe closed at $494.08 per share. I was right that it wasn't a buy at those levels, but I should have been a little more bearish...

The stock dropped after the company reported earnings in December and again last Wednesday after first-quarter earnings (here are links to the press release and conference call transcript and slides). It just closed at $394.74 per share on Friday.

It was a strong first quarter: Year over year, revenue grew 10% to $5.71 billion, slightly above expectations of $5.66 billion... and adjusted earnings per share were up 5.6% to $5.08, beating estimates of $4.97. Adobe also reaffirmed guidance for the second quarter and full year.

So why did the stock fall 14% on Thursday to a 52-week low?

Because investors continue to worry about what I mentioned in my analysis on October 9: "My gut tells me AI will be a modest headwind for Adobe."

But with the stock down 20% since then, I think this concern is pretty much baked into the price.

Analysts expect the company to earn $20.41 per share for the year, which means it's trading at 19.3 times this year's estimates... so I'm going to move it up on my "bench," and my team and I here at Stansberry Research will do some more work.

If we decide the stock is compelling enough to add to our Stansberry's Investment Advisory model portfolio, subscribers will be the first to know.

So if you aren't already an Investment Advisory subscriber, you can find out how to become one – and how to gain immediate access to our full portfolio of existing open recommendations – by clicking here.

2) When I saw that the stock of fitness company Peloton Interactive (PTON) soared 16% to close at $7.05 on Friday, I assumed the company had reported strong earnings – but it was just an analyst upgrade. This article on Yahoo Finance has more details: Peloton Stock Rises as Analyst Says It's at a 'Turning Point'. Excerpt:

Peloton shares popped Friday after analysts at Canaccord Genuity upgraded the company's stock to "buy" from "hold."

The company is the "clear leader in the connected fitness industry," the analysts said in a note Thursday, with a "loyal member base" that stands 6 million strong.

I almost never pay attention to analysts' reports, upgrades, and downgrades. But it's interesting that the stock, even after Friday's move, is almost back to $6.27 per share – the price at which David Einhorn of Greenlight Capital recommended it at the Robin Hood Investors Conference on October 23 (I wrote about it in my October 29 e-mail).

Peloton is on my list to revisit...

3) Turning to coffee giant Starbucks (SBUX), this Wall Street Journal article highlights some of the big changes new CEO Brian Niccol is undertaking: The Latest Overhaul of Starbucks – by the Numbers. Excerpt:

In the six months since Chief Executive Brian Niccol took the helm of Starbucks, he has slimmed down menus, reduced discounts and restricted bathrooms to paying customers. At the coffee chain's Seattle headquarters, he has revamped the marketing strategy and launched one of the biggest reorganizations in the company's history.

Niccol, who previously helped turn around Chipotle Mexican Grill, says a shake-up is needed – fast. Starbucks's same-store sales have fallen for four straight quarters. Investors back him, though the rapid changes have spooked some employees.

I continue to be impressed by Niccol. And seeing Starbucks pull back 15% along with the market in the past few weeks makes for a better entry point to put new money to work. But it's still trading at 33.3 times this year's earnings estimates, so that makes me hesitant.

4) I wrote about long-struggling chip giant Intel (INTC) on September 6, September 9, and December 9, where I concluded:

As an American, I'm rooting for Intel. And if I were forced to go long or short the stock, I would definitely go long.

But the beauty of investing is that I'm never forced to do anything – and Intel falls into that category. I still think this stock is better off just avoiding.

Through Friday's close, the stock is up 16% since my December e-mail – mostly on news that the company has hired a new CEO. Here are three recent WSJ articles and a video about him:

Wall Street is cheering Intel's choice of new chief executive. If history is any guide, the honeymoon will be brief.

Intel's shares jumped 14.6% by Thursday's close following the appointment of Lip-Bu Tan. The former CEO of Cadence Design Systems has plentiful chip-industry experience and served a stint on Intel's board of directors. Analysts see him as a solid pick for what looks like the toughest job in the sector.

"Lip-Bu Tan in as CEO at Intel was as good as stakeholders could have hoped for," TD Cowen's Josh Buchalter told clients Thursday. But he cautioned that whatever Tan's strategy, it was unlikely to yield results for some time...

"He has a big job in front of him and a lot of wood to chop," said Bernstein's Stacy Rasgon, adding that if Tan failed, Intel was likely unfixable. The new CEO won't have a lot of time to sharpen his axe.

Overall, I would continue to remain on the sidelines based on Intel's balance sheet and cash-flow statement.

5) Last but not least is Southwest Airlines (LUV), which I wrote about on August 28, September 3, September 12, October 16, October 22, and February 20. In the chart below, you can see the stock's movement since that August e-mail:

As you can see, Southwest's stock is up a bit since late August. And there has been a huge change at the company, as Southwest has effectively capitulated to activist shareholder Elliott Investment Management and made the changes that will bring it in line with other major carriers – most notably charging for checked bags and introducing a basic economy fare. Here are three recent WSJ articles with more details on the changes:

The question for investors is whether these changes will just alienate customers... or might lead to a happy outcome – like what happened to JetBlue (JBLU) a decade ago, which I discussed in my August 27 e-mail: Five lessons from when I tripled my money on JetBlue Airways.

My guess is... probably not the latter.

Of the five things JetBlue did to triple its earnings, Southwest is only doing one of them: charging for checked bags. And Southwest today is much larger than JetBlue was then, with 5 times the revenue, so it'll be much harder to move the needle.

So, in conclusion, I think all five of these stocks I covered today are interesting and will likely do well – that's why I continue to follow and write about them – but none are cheap enough to have me "trembling with greed."

That said, if I was forced to buy one today, I would pick Adobe. As a software business, it has the most mouth-watering economic characteristics... and its stock is near a 52-week low – trading at less than 20 times this year's earnings.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.