Autodesk Analysts: Sell-off May Be Overreaction, Fundamentals Remain Strong

Sell-side analysts remained mostly bullish, though with lowered price targets, on Autodesk, Inc. ADSK after a strong second-quarter print that was marred for investors by lowered guidance that reflects international economic concerns.

Autodesk beat quarterly targets soundly, with revenue well above the consensus estimate, but lowered its full-year outlook on macro concerns, a cautionary move tied to Brexit, softening manufacturing in Europe and the trade war with China.

The stock sold off hard after the print and continued to plummet Wednesday, down more than 10%, but several analysts said it remains a long-term buy.

The Analysts

KeyBanc Capital Market's Jason Celino maintained an Overweight rating on Autodesk and lowered the price target from $196 to $184.

Morgan Stanley’s Keith Weiss maintained an Equal-weight rating and $150 price target.

Canaccord Genuity’s Richard Davis maintained a Buy rating on the stock and lowered the target price from $190 to $160.

Barclays analyst Saket Kalia maintained an Overweight rating on Autodesk with a price target lowered from $199 to $173.

Stifel’s Adam Borg maintained a Buy rating on the stock and lowered the price target from $185 to $160.

Wedbush analyst Steve Koenig maintained a Neutral rating on Autodesk and lowered the target price from $164 to $149.

The Takeaways 

KeyBanc’s Celino noted strong second-quarter annual recurring revenue growth and said that, despite the lowered guidance on global issues, he views North American demand trends as intact.

“We continue to like ADSK's long-term opportunities in construction and believe the company has one of the more resilient subscription models under our industrial software coverage,” the analyst said in a Tuesday note. 

Morgan Stanley's Weiss agreed, saying that models still show strong annual recurring revenue growth in the near-term.

But the lowered full-year outlook “likely stokes investor concern,” and that “likely keeps a lid on the multiple,” Weiss said of the decision to remain Equal-weight on the stock.

Canaccord Genuity’s Davis implied that investors overreacted to the guidance change.

“ADSK shares delivered the classic knee-jerk, after-hours reaction to a guide down as fast twitch traders and algorithms hit the sell button 59 minutes before the conference call began,” the analyst said. 

US Policy Issues Also In Play

Davis blamed federal policy for creating a tougher environment.

“Obviously nobody likes a guide-down, but … we applaud Autodesk management’s proactive approach to the Trump-caused disassembly of 75 years of the global supply chain,” the Canaccord Genuity analyst said.

Much of the stock’s future hinges on what occurs in Washington, he said.

“If trade wars subside, Congress does some stimulus and the Fed cuts rates, ADSK shares could rally before the firm prints what should be a respectable quarter against a de-risked guide in 90 days,” Davis said.

“Alternatively, if the skirmishes are still underway by Halloween, then the stock will grind along because investors will want to see Autodesk’s print and guide.”

Subscriptions Renewing At Better Prices

Barclays’ Kalia said in a Wednesday note that he kept an Overweight rating on Autodesk with optimism about upcoming opportunities through pricing actions.

Legacy promotion subscribers are renewing at better rates — from the company’s perspective — and overall there’s a growing renewal base coming back with a higher revenue yield, the analyst said. 

Stifel's Borg said the guidance nod to macro issues makes lowered estimates logical, especially against tough comparisons.

“That said, we are pleased to see ongoing success with Autodesk's construction-focused portfolio, continue to believe Autodesk is well-positioned across the AEC/manufacturing markets it serves, and that the company's model transformation offers more resiliency.”  

Wedbush remains sidelined until the stock price comes down a bit, Koenig said.

“We would look for a pullback or a meaningful catalyst … to become more positive.”

Price Action

Autodesk shares were down 9.31% at $136.23 at the time of publication Wednesday. 

Related Links:

Autodesk Shares Crushed After Q2 Earnings Beat, Lower Guidance

Autodesk Analysts Talk Growth Drivers After Investor Day

Photo via Wikimedia

Posted In: Adam BorgBarclaysBrexitCanaccord GenuityJason CelinoKeith WeissKeyBanc Capital MarketsMorgan StaleyRichard DavisSaket KaliaSteve KoenigStifeltrade warWedbushAnalyst ColorEarningsNewsGuidancePrice TargetReiterationAnalyst Ratings

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