NASDAQ: ADSK
COMPANY DESCRIPTION
Founded
in – 1982 | Current Market Cap – 33.99 Billion USD
Autodesk,
Inc. operates as a design software and services company worldwide. The company
offers AutoCAD, a professional design, drafting, detailing, and visualization
software; and AutoCAD LT, a professional drafting and detailing software;
computer-aided manufacturing (CAM) software for computer numeric control
machining, inspection, and modelling for manufacturing; and AutoCAD Civil 3D, a
surveying, design, analysis, and documentation solution for civil engineering,
including land development, transportation, and environmental projects. It also
provides Maya and 3ds Max software products that offer 3D modeling, animation,
effects, rendering, and compositing solutions. It licenses or sells its
products to customers in the architecture, engineering, and construction;
manufacturing; and digital media, consumer, and entertainment industries
directly, as well as through distributors and resellers. The company is based
in San Rafael, California.
RECOMMENDATION
We rate Autodesk, Inc. a Sell at USD 159
for a target of USD 138 in a couple of months.
Below are the basic reasons to
recommend this stock as a SELL
·
Autodesk’s top-line growth over the last couple
of years has been negatively impacted by the ongoing business model transition.
The continuing movement from perpetual licenses to cloud-based services as well
as migration of maintenance plan customers to subscription plan offerings has
severely hurt revenues. The trend is expected to continue in the near and long
term.
·
Moreover, higher spending (cost of revenues +
operating expenses) weighed on profitability. Although restructuring programs
are corrective measures to realign cost, their success often depends on
execution. Most importantly, we believe that there is a certain limit up to
which costs can be curtailed, after which investments are needed to boost
organic growth. However, its plan to continue to shift to mobile and cloud
computing will increase investments. In the long term, we believe that
restructuring programs will not be enough to boost earnings and the company
will need to generate organic revenue growth to yield profits.
·
The biggest flaw as an investment is that
Autodesk trades at a $33.9 billion market cap, which is 24 times expected 2020
free cash flow. That's a big premium to pay for a company that hasn't yet
proven it can generate more than a billion dollars in cash per year.
·
Autodesk has significant product concentration.
The company derives a significant portion of its revenues from AutoCAD and
AutoCAD LT, which accounted for 20% of revenues in fiscal 2018 compared with
16% in fiscal 2017. Similarly, Autodesk depends on a few distributors (like
Tech Data) for the major portion of its revenues (31%).
·
Moreover, Autodesk generates significant portion
of revenues (64% in fiscal 2018 against 63% in fiscal 2017) from international
operations. Despite hedging program, the exposure makes the company vulnerable
to foreign currency volatility.
·
Autodesk has experienced deterioration in gross
margin since fiscal 2012, falling to 83.2 percent from recent highs of 90.5
percent. Transition to a subscription model has coincided with higher labor
costs of revenue, depressing the margin.
LAST EARNINGS
Autodesk reported second-quarter
fiscal 2019 non-GAAP earnings of 19 cents per share, which beat the Consensus
Estimate by couple of cents. In the year-ago quarter, the company reported
non-GAAP loss of 11 cents.
Revenues of $611.7 million beat the
consensus mark and increased nearly 22% year over year. The figure was better
than management’s guidance of 605 million.
BALANCE SHEET
As of Jul 31, 2018, Autodesk had
cash and cash equivalents (including marketable securities) of $1.29 billion compared
with $1.46 billion as of Apr 30, 2018.
Total debt at the end of the second
quarter was $1.59 billion.
Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.
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