Autodesk's Beat Overshadowed By Subscriber Guidance

Many investors are concerned with Autodesk, Inc. ADSK's earnings report, including net subscription guidance and other reported metrics.

The Analyst

KeyBanc Capital Markets' Monika Garg maintains an Overweight rating on Autodesk's stock with a price target lowered from $136 to $134.

The Thesis

Autodesk reported third quarter results Tuesday, including report lower net subscriber additions and lowering its full fiscal year 2018 net subscription addition guidance at the high end, Garg said in a research report. (See Garg's track record here.) 

The reduction could be attributed to fewer cloud promotion activities and a higher mix of customers shifting to lower volume but higher-priced products, Garg said. At the same time, Autodesk reiterated its annualized recurring revenue, or ARR, outlook and also raised its revenue and earnings per share guidance for the year, according to KeyBanc. 

Investors should consider ARR as "the metric to watch" as it is composed of two components, Garg said: 

• Pricing/average revenue per subscriber, or ARPS.
• Net subscriber adds.

While net subscriber growth is the key to ARR growth, the 24 percent ARR compounded annual growth rate target through fiscal 2020 is "still achievable," the analyst said. 

Autodesk's maintenance to subscription, or M2S, program continues to "execute well," and conversions rose from 25 percent in the prior quarter to 33 percent in the third quarter, Garg said. The acceleration in growth implies that customers are converting under the M2S program faster than previously expected.

Price Action

Shares of Autodesk were trading lower by around 12 percent early Wednesday morning.

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Photo courtesy of Autodesk.