Chantal Marx, Pritu Makan, Sithembile Bopela, Zimele Mbanjwa, Motheo Tlhagale and Khumbulani Kunene
Adobe (ADBE US, ADETNC, ADETNQ)
Diversified software company, Adobe Inc., develops, markets, and provides support for computer software products and technologies. The company offers a line of application software products and content for creating, distributing, and managing information - including popular platforms such as Photoshop, Acrobat Reader, and Adobe Creative Cloud. The group has a wide global footprint, with the Americas being Adobe's largest market, representing about 60% of revenue. The Europe, Middle East, and Africa (EMEA) region generates around 25% of revenue, and the Asia-Pacific (APAC) region contributes some 15%.
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Adobe's growth over the last few years can be attributed to its successful transition from a traditional software selling model to a subscription-based model. This shift has led to more stable recurring revenues, making Adobe a popular choice among investors looking for steady growth in the technology sector.
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Subscription-based models for Creative Cloud, Experience Cloud, and Document Cloud has pivoted the company to an attractive annuity income profile. Approximately 96% of revenue is generated from subscriptions, and the balance from products and services.
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Adobe's continuous growth of its digital media, cloud platform and related services driven by creative generative AI investment, future-fit the company for strong growth and good value return for shareholders.
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Digital Media annual recurring revenue (ARR) strengthened and remaining performance obligations (RPO) have seen healthy growth recently, setting precedence for strong future revenue generation.
Apart from its attractive annuity income profile and strength in traditional creative, Adobe's innovative prowess is set to position it to capitalise on strong off-market opportunities, mostly driven by creative generative AI models, such as Adobe Firefly where monetisation of such remains a growth and income diversification opportunity. Adobe also remains favoured by analysts, with Bloomberg showing that 67% of sell-side analyst maintain a 'buy' rating on the stock, while 31% maintain a 'hold' rating.
Adobe is trading on a forward PE of ~18.3 times, a large discount to its long-term average rating over time of 32 times.
Alphabet (GOOGL US; ALETNC; ALETNQ)
Alphabet is the holding company of Google, which owns some of the world's most well-known technology and hardware solutions including the Google search engine, the Android smartphone operating system, and a multitude of other internet-based services, including YouTube. Google is also a key player in the cloud computing space offering a full suite of services including data storage, analytics, and machine learning. In addition, Alphabet also has investments in other businesses collectively as Other Bets.
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Alphabet boasts relevant platforms with impressive global daily average user numbers and has diversified revenue streams across Google Ads, Google Cloud and Other Bets including DeepMind.
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The cloud computing business has strong thematic support amid the evolution of remote/hybrid working.
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Growth prospects for AI and related offerings are attractive.
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The company has sizable cash flows and assets to develop new platforms in keeping up with market trends. A good example is the creation of YouTube Shorts in response to TikTok.
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The company saw a strong start to the new year, topping consensus expectations on all fronts in 1Q25 and showing robust momentum across the business.
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The top and bottom lines saw strong growth, underpinned by the success of the full stack AI approach following the rollout of the most intelligent AI model, the Gemini 2.5, which resulted in breakthroughs in performance and provided further support to growth in Google Cloud. Advertising revenue was also upbeat, with growth from YouTube complemented by a surge in paid subscription growth that exceeded 270 million users for both YouTube and Google One. On the back of stronger customer demand, Search growth was boosted by increased engagements (including AI Overviews) and now has 1.5 billion user per month.
The stock has been under pressure so far this year, along with other so-called "hyperscalers", after the emergence of Deep Seek spooked investors - particularly as it relates to capital expenditure on AI medium term. This was further compounded by a general sell-off in growth after the "Liberation" day announcements on 2 April.
Alphabet is trading on a forward PE of 15.6 times, which is well below its long-term history and a lower-than-average premium to its peer group.
Novo Nordisk (NOVOB DC, NNETNC, NNETNQ)
Novo Nordisk is a global leader in healthcare that develops, produces, and markets pharmaceutical products. The company has deeply rooted expertise in diabetes care and obesity treatment and offers insulin delivery systems and other diabetes products. Novo Nordisk also works in rare disease areas such as haemostatis management, growth disorders, and hormone replacement therapy.
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The group has a very focused portfolio, which underpins its leadership in the diabetes care market (~33.3% share). Some of the group's best-known GLP1 drugs include blockbuster Ozempic and Wegovy used for the treatment of diabetes and obesity management, respectively.
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Novo has been highly acquisitive since its inception, with the most recent acquisition of US-based drug manufacturer Catalent marking an important step towards enhancing Novo's production capabilities and accelerating therapy and drug innovations — particularly the fast-growing weight-loss segment.
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The addressable market for diabetes and weight-loss drugs remains vast, with the GLP-1 industry expected to be worth >$150 billion by the early 2030s as both diabetes patients and global obesity rates continue to increase rapidly, while treatment penetration rates remain very low. This constitutes a massive unmet medical need that no one company can surmount.
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Recent 1Q25 results were robust, however, management reduced its full-year revenue and profit expectations due to lower-than-planned branded GLP-1 penetration, impacted by the rapid expansion of compounding—i.e. replicas of the drugs produced by compound pharmacies during times of drug shortages in the US.
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The group remains actively focused on preventing unlawful and unsafe compounding and on efforts to expand patient access to GLP-1 treatments. Novo also completed the last pivotal trial for its next-generation obesity treatment, CagriSema, and has filed for US approval of oral semaglutide 25mg, with the potential to be the first oral GLP-1 treatment for obesity.
The growth outlook is strong, underpinned by management's focus on expanding the company's pipeline, improving operational efficiencies, making significant investments to develop new therapies for chronic conditions beyond diabetes, label expansions for its metabolic drugs, and heightening barriers to entry for competitors.
Novo Nordisk is trading on a forward PE of 15.6 times, which seems attractive compared to its long-term average rating of 28 times. The GLP-1 drug market is in a dynamic and rapidly evolving phase, fuelled by an urgent need to address the diabetes and obesity crises as well as the substantial commercial potential of effective therapies. As such, we remain positive on the growth prospects of the company.
ASML (ASML NA, ASETNC, ASETNQ)
ASML designs and manufactures deep ultraviolet (DUV) lithography systems and extreme ultraviolet (EUV) lithography machines that are used to manufacture semiconductor chips. ASML is the only manufacturer of EUV systems that print smaller chip features, resulting in faster, more powerful chips. This enables the production of highly powerful chips required to drive the AI revolution at scale, and at a lower cost.
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One of the key drivers of growth in the semiconductor industry is what is known as affordable shrink. Affordable shrink is the ability to make smaller, more energy-efficient chips at a lower cost.
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ASML maintains a dominant position among semiconductor manufacturing equipment suppliers. In 2023, it held a ~24% market share in Front-End equipment supply (machinery used in the initial stages of wafer fabrication) and ~4% in Back-End equipment (machinery used in the later stages of chip manufacturing, primarily focused on packaging and testing the processed wafer). It is estimated that in the lithography space, ASML holds a market share of over 80%.
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The boom of AI applications, particularly predictive and generative AI, underpins the surge in demand for advanced semiconductor components due to their rapid and efficient processing power, but adoption is still in its infancy. In a report on AI adoption published in 2024 by the Boston Consulting Group, a survey, which spanned across 59 countries in North America, Asia and Europe, showed that only ~4% of companies across 20 sectors have developed "cutting edge" cross-functional value-accretive AI.
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The growing Installed Base opportunity is robust, benefitting customers by lowering the cost to service/upgrade rather than buying new machinery, as well as providing ASML with another source of revenue.
Revenue forecasts are strong and, together with anticipated margin expansion, will result in solid earnings growth going forward. Return metrics were improving prior to last year (having been a year of investment in the new generation EUV technology), with return on invested capital well above WACC even through this latest investment cycle.
ASML's share price has begun to recover following the recent Trump Tarrif tantrum, but it is still trading at the bottom end of its long-term fair value range from a PE multiple perspective.
AirBnB (ABNB US, BBETNC, BBETNQ)
Airbnb, Inc. is a global online marketplace that connects travellers with hosts offering lodging, homestays, boutique hotels, and curated travel experiences through its website and mobile app. Founded in 2008 as Airbed & Breakfast, the company has transformed the hospitality industry by enabling individuals to safely and conveniently rent out their properties to guests. Since then, Airbnb has expanded its offerings to include traditional accommodations and experiences, growing to over five million hosts and facilitating more than 1.5 billion guest arrivals across nearly every country worldwide.
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The short-term rental market has seen remarkable growth over the past decade, fuelled by shifting consumer preferences, technological advancements, and changing travel habits. The global trend toward more personalised and flexible travel experiences has made short-term rentals increasingly attractive, offering unique accommodations that cater to a wide range of traveller needs.
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Airbnb maintains a competitive edge through its well-established presence and proven success in the short-term vacation rental segment. The ease of use of the app, an engaged guest community, and strong host management system sets Airbnb apart from its peers.
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There is secular support for the sharing economy, and this is not expected to change anytime soon. Vacation rentals (an area of strength for Airbnb) remain popular and gained in prominence relative to traditional accommodations during the Covid-19 outbreak. For example, Booking.com disclosed that "alternative accommodations" accounted for ~37% of all accommodation bookings in 1Q25.
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Like Google, Airbnb's brand has grown to become a verb. "Let's Airbnb a place" has become as commonplace as "just Google it". Airbnb's brand recognition is substantial.
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Airbnb's first-quarter results showed a mix of strong top-line growth and underlying profit outperforming expectations. In terms of travel trends, the group saw relatively consistent booking behaviour in terms of market type, travel corridor, and length of stay compared to the same prior-year period.
Airbnb is well-positioned for future growth, with solid cash reserves and an optimistic outlook for the rest of the year.
Trading at a forward PE of 17.7 times, the company looks cheap relative to its long-term average rating, with good growth to come medium term.
