Autodesk, Inc. ADSK's third quarter earnings report resulted in the stock notably selling off by 15 percent on Wednesday, which reinvigorated Wall Street's bull vs. bear debate on the software company.
Morgan Stanley: Upside Potential
Heading into Autodesk's earnings report, many investors were expecting a "better than in-line" report, but the company delivered an "in-line where it matters" report, Weiss said in a note. Autodesk's business model is dominated by multiple subscription offerings and products and a more complex set of promotions and bundling. This was made apparent in the third quarter, when net subscription additions fell short of expectations yet management "proclaimed a solid quarter," Weiss said.
Overall, the third quarter earnings report can be broken down into three pieces, Weiss said:
The subscription add miss isn't as bad as it may appear, as the majority of the miss comes from low-priced and sometimes free Cloud subscriptions.
Annualized recurring revenue growth of 25 percent is consistent with the company's target of 24-26 percent, but investors may have been expecting a better reading.
The core reason for owning Autodesk's stock is unchanged and management is on track to achieve its longer-term guidance.
"Given a core business still on track, we see ADSK continuing to progress toward our $143 price target," the analyst said.
Credit Suisse: Good Report, But Concerns Remain
Credit Suisse's Michael Nemeroff maintains an Outperform rating on Autodesk's stock with a price target dropped from $140 to $135.
Autodesk shared an overall "good" report that was highlighted by two of the company's largest deals in its entire history, Nemeroff said in a research report. In addition, the report showed that maintenance to subscription conversions are tracking better than expected, as one-third of maintenance customers that were up for renewal converted to product subscription, the analyst said. But a reduction in the company's net subscriber additions in fiscal 2018 is among one of the reasons why the stock is seeing heavy selling pressure, he said.
While management noted that the reduction in net sub adds is attributed to a decrease in Cloud-related promotions in the fourth quarter, it will actually have a positive impact on average revenue per subscriber and will be neutral to ARR, Nemeroff said. As such, the bullish case for owning the stock remains, but with a lower price target, according to Credit Suisse.
Canaccord Genuity: 'Squishy' Quarter
- Autodesk's earnings report is merely a normal "hiccough," which is expected for a company transitioning to a subscription business model, Davis said.
- The stock's long-term prospect of trading as high as $250 within five years remains unchanged, the analyst said.
KeyBanc: Subscriber Concerns
KeyBanc Capital Markets' Monika Garg maintains an Overweight rating on Autodesk's stock with a price target lowered from $136 to $134.
Investors should focus on Autodesk's ARR as being "the metric to watch" moving forward, Garg said.
- A 24 percent ARR compounded annual growth rate target through fiscal 2020 is "still achievable," the analyst said.
Wedbush: Downgrade Justified
Wedbush's Steve Koenig downgraded Autodesk's stock rating from Outperform to Neutral with a price target lowered from $138 to $126.
- Autodesk's "surprisingly slow" ramp in free cash flow now limits the long-term visibility, Koenig said.
- A potentially higher attrition from planned maintenance price increases should be of concern to investors, the analyst said.
- The company will now need to spend more money than previously expected in digital infrastructure and cloud offerings, Koenig said.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.
All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.
Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.
Rate collection and criteria: Click here for more information on rate collection and criteria.