Autodesk Shares Remain On The Road To $100, Pullbacks May Be Buying Opportunity

Autodesk, Inc. (NASDAQ: ADSK) “beat across the board for its year-end, which is a good thing, but also reflects broadly favorable trends in the design software space,” Canaccord Genuity’s Richard Davis said in a note, while maintaining a Buy rating on the company, while raising the price target from $95 to $100.

Stock Performance

Although the stock has outperformed year to date, rising 18 percent, as compared to the 9 percent increase in the Nasdaq, the analyst pointed out that a shift to a subscription model is always complicated.

This was visible on March 1, when Autodesk shares dipped after hours, despite the robust results and outlook.

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Model Shift

“Where the story gets a bit more complex is with guidance that incorporates a progressive change in pricing to encourage an accelerated shift to product subscriptions,” Davis mentioned.

Regarding pricing, the analyst mentioned that maintenance and non-subscribers now have the option to “lock-in a minimally higher subscription price,” or they would need to pay much more after a couple of years.

While this appears to be a logical strategy, in theory, it could add some risk, especially regarding the accuracy with which management would be able to guide to cut-over, and potentially also add competitive risk, since other vendors are likely to use these pricing tactics against Autodesk.

However, the analyst sees “little threat on this front,” and stated that “management’s baseline guidance for ~25 percent ARR (Annualized Recurring Revenue) growth next year supports our confidence in trends.”

Davis continues to believe that Autodesk’s target of achieving free cash flow per share of $6 in calendar year 2019 and of $11 in 2022 is a reasonable goal.

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