Bank Of America Downgrades Autodesk, Claims 'Execution Must Be Perfect For Success'

Kash Rangan of Bank of America downgraded shares of

on Tuesday to Underperform from Neutral with a price target lowered to $56 from a previous $63. “In our view, for Autodesk to reach investor expectations events need to be perfect,” Rangan wrote. “All of the 2.9mn commercial non-subscribers convert into subscribers, with 1.6mn non-AutoCAD LT non-subscribers converting at a ~$700 average revenue per user while 1.3 million AutoCAD LT non-subscribers convert at ~$180 (current maintenance price). The analyst states that the despite the planned perpetual license phase-out over the next one to two years, it is “still unclear” how the transition is progressing and if there is a pull-forward in license demand. With that in mind, Rangan notes that further potential upside in share prices are limited and that concerns exist that maintenance catch-up and license buying ahead of perpetual license phase-out might translate to a fall-off in fiscal 2018 license. In fact, the analyst states that the company will need to reduce its cost structure by fiscal 2018 to achieve a 30 percent non-GAAP operating margins (compared to 13 percent this quarter) to reach an earnings per share of $3.82 at that time.