One of the biggest trends of the past 15 years has been the growth of apps, particularly smartphone apps. However, investing in that trend has been a challenge. Outside of owning a smartphone manufacturer or developer like Apple (AAPL), there hasn’t been one specific way to play that trend.
For the next generation of apps, led by AI technologies, there are now several opportunities emerging. Many are from deep-pocketed companies that already provide back-end software services.
For instance, Adobe (ADBE) is best known for its PDF reader. But the company provides a number of solutions for app providers. And they’re investing in AI technologies to benefit from them.
It’s likely that will increase Adobe’s profitability, as their customers will pay more for built-in AI services, and avoid the cost of building out AI services in house. Adobe already has a 26 percent profit margin, and this could push it into the 30 percent range.
Action to take: Adobe shares have already pushed to 52-week highs on the news of their AI development. Investors should look for a pullback under $450 as an entry point to start building a stake. At present, the company does not pay a dividend.
For traders, shares are in a short-term pullback in a broader rally. The October $520 calls, last going for about $22.85, should see mid-double-digit returns on a leg higher in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.