Autodesk, Inc. (ADSK) Buy or Sell Stock Guide

Last updated: Apr 12, '19

Are you looking for the analysis of Autodesk, Inc. (ADSK) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 10 reasons to buy and 7 reasons to sell ADSK stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about ADSK stock:

  • Is ADSK a buy or a sell?
  • Should I sell or hold ADSK stock today?
  • Is ADSK a good buy / investment?
  • What are ADSK analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy ADSK stock:

1. High switching costs and network effects support Autodesk's wide moat. Engineers and designers are trained on Autodesk products in school, and employers don't want to incur the costs to retrain them on different software.

2. Cloud software delivery is a game-changing way to combat piracy--a potential boon for Autodesk. Currently, piracy in Asia-Pacific is very high, and even in developed countries, piracy rates are around 25%-30%.

3. A growing recurring revenue base makes it easier for Autodesk to predict and adapt to market forces and customer demand.

4. Autodesk’s business transition from licenses to cloud-based services is expected to benefit it in the long run by boosting its subscriptions and deferred revenues. Cloud subscriptions continue to see solid growth driven by BIM 360 and Fusion 360 products. Also, in order to boost customers to move from maintenance subscriptions to product subscription, management is offering discount, which is increasing subscription base.

5. We remain positive on Autodesk’s long-term growth prospects as it is well positioned to capitalize on the rapid adoption of computer-aided designing and manufacturing through its comprehensive product portfolio. We expect its broad product portfolio to generate new customers in both domestic and overseas markets. Moreover, improvement in construction and manufacturing activities in the emerging markets present further growth opportunities.

6. Autodesk’s aggressive acquisition strategy has played a pivotal part in developing its business over the last couple of years. The company acquired Graitec and made fourteen business combinations and technology acquisitions during fiscal 2014 for a total consideration of $176.7 million. During fiscal 2015, Autodesk acquired fifteen businesses including Shotgun, Within Technologies and Delcam for a sum of $578.6 million.

7. ADSK quarterly revenue growth was 33.10%, higher than the industry and sector average revenue growth (5.34% and 5.21%, respectively). See ADSK revenue growth chart.

8. ADSK profitability is improving. The YoY profit margin change was 1.10pp. See ADSK profitability chart.

9. ADSK PEG ratio (P/E adjusted for growth) is 0.85, and it’s low compared to its industry peers’ PEG ratios. See ADSK PEG chart.

10. ADSK average analyst rating is Buy. See ADSK analyst rating chart.

Now that you understand the bull case, let’s look at the reasons to sell ADSK stock (i.e., the bear case):

1. Distributor consolidation poses a risk to Autodesk's sales channel.

2. Open-source CAD software, while not a threat at the moment, could erode the need for full-feature professional CAD software over the long term.

3. Operational issues in Japan highlight some macroeconomic concerns outside its core U.S. and European base of business.

4. Autodesk has significant product concentration. The company derives a significant portion of its revenues from a handful of products like AUTOCAD and AUTOCAD LT. Though the company is making efforts to diversify its revenues, decline in demand for any of these products in the foreseeable future will affect the company’s growth adversely.

5. Autodesk’s business will likely be impacted because of the investments in cloud-based infrastructure and marketing initiatives especially as it is taking a number of promotional initiatives to boost demand. This is a serious concern since the company is still not profitable. Additionally, uncertain macroeconomic conditions, especially in emerging nations, add to its woes.

6. ADSK stock price ($171.88) is at the 52-week high. Perhaps now is a good time to sell? See ADSK price chart.

7. ADSK Price/Sales ratio is 13.99, and it’s high compared to its industry peers’ P/S ratios. See ADSK forward Price/Sales ratio chart.

Now let's look at the key statistics for ADSK:

Metrics ADSK
Price $175.32
Average Price Target / Upside $180.57 / 2.99%
Average Analyst Rating Buy
Industry Software - Application
Sector Technology
Number of Employees 8,800
Market Cap $37.15B
Forward P/E Ratio 35.1
Price/Book Ratio 14.45
PEG 0.7
Revenue (TTM) $2.57B
YoY Quarterly Revenue Growth 33.1%
Profit Margin -3.14%

What are your thoughts on ADSK?

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