Autodesk Is A Mature Company Still Acting Like A Growth Stock

Key Points

• Despite going public way back in 1985, Autodesk has been growing sales and earnings at double-digit rates
• Autodesk CFO says underlying business momentum is offsetting foreign exchange headwinds, with mid-point guidance unchanged
• Analysts’ consensus rating on the stock is a “moderate buy” 

Shares of design software maker Autodesk NASDAQ: ADSK were trading higher Monday, bucking the broader market downdraft. 

Early Monday, news broke that Dara Treseder would be joining Autodesk from beleaguered exercise gear maker Peloton NASDAQ: PTON. She will serve as chief marketing officer, the same post she held at Peloton.

Peloton, whose stock is down 76.20% year-to-date and down 90.98% on a one-year basis, just can’t catch a break, following its dramatic ride up the mountain in 2020. The story is well known by now: Stay-at-home orders and gym lockdowns resulted in a spike in Peloton sales that steadily reversed lower, beginning with the quarter ended in December 2020.

In the past two quarters, year-over-year revenue declined more than 20%.

While Treseder is just the latest executive to jump off the slowing bike, it’s a different story at Autodesk, the company she is joining.

Strong Earnings And Revenue Growth

Fundamentally Autodesk is well situated. Revenue has also grown at double-digit rates in the past eight quarters, while earnings did the same. 

Autodesk reported its second quarter on August 24, earning $1.65 per share, a year-over-year gain of 36%, topping analysts’ views. 

Revenue came in at $1.24 billion, ahead of expectations for $1.22 billion.

The company updated its third-quarter earnings guidance, saying it now expects net income between $1.66 and $1.72 a share. That’s an improvement over analysts’ expectations of $1.67 per share. 

On the revenue side, Autodesk gave updated guidance calling for a range between $1.27 billion and $1.29 billion. The consensus estimate had been $1.27 billion. 

The company also updated its full-year earnings outlook to a range of $6.52 to $6.71 per share. 

The San Rafael, California company has notched profit every year since 2019, as MarketBeat data reveal. In fact, earnings have grown in the past two years, with Wall Street eying another 31% growth for the current year, to $6.62 per share, so more or less in the middle of Autodesk’s own estimate.

The company is currently in the third quarter of fiscal 2023. For fiscal 2024, analysts see earnings rising by another 19%, to $7.85 per share. 

Its three-year earnings growth rate is 40%, while the three-year revenue growth rate is 16%. 

Strong Dollar Not Hurting Growth

In the second quarter, Autodesk’s growth was pegged to increases in each of its business units and regions. The gains came despite a stronger dollar, which had the potential to cut into non-U.S. business. 

Company CFO Debbie Clifford addressed that point in a statement accompanying the company’s earnings release. 

“Demand remained robust, our competitive performance strong, and subscription business resilient during the second quarter,” she said. “With the underlying momentum of the business offsetting incremental foreign exchange headwinds, our guidance is unchanged at the mid-point across all metrics. We remain well on track to achieve our fiscal ‘23 goals.”

Like many businesses, the maker of 3D design, entertainment, and engineering software is shifting more to a subscription model. This not only generates recurring revenue, but it smoothes sales rates as well. 

Although this company has characteristics of a growth stock, it’s well established, having gone public way back in 1985. The fact that it’s pivoting along with the current market and technological environment shows that management is not getting stuck clinging to what worked in the past, which was a problem that tanked Eastman Kodak NYSE: KODK as the company moved too slowly to address the rise of digital images over film. 

According to MarketBeat analyst data, the consensus estimate on Autodesk is a “moderate buy,” with a price target of $259.90, representing an upside of 40.27%. 

Analyst ratings are somewhat mixed on the stock. However, it’s worth noting that even some like Rosenblatt Securities, which lowered its price target on August 25, still has a “buy” rating on Autodesk. Moffett Nathanson, which has a “sell” rating, still expects a 7% upside.