Autodesk Stock Up 25%, Analysts Want More Double-Digit Gains

Key Points

• Autodesk rallied by 25% on earnings, but Wall Street wants another double-digit run. 
• Riding on artificial intelligence adoption in the construction sector, Autodesk management boosted its 2025 guidance. 
• Fundamental trends support another potential run forward, and 'smart money' believes in it.

Over the past quarter, fueled by the company’s latest quarterly earnings results, shares of Autodesk Inc. NASDAQ: ADSK have rallied by more than 25%. However, while some investors may be wary of buying into a rally, this could be the best time to consider Autodesk as a bullish momentum stock with some extra fuel left in the tank.

Starting the second half of 2024 well is important, but the question is whether Autodesk can sustain its momentum through the year’s end. For reasons that will become clear in just a bit, investors can come to a sensible conclusion backing up a potentially bullish thesis for the stock moving forward.

While most of the market attention has been going into the technology sector, NVIDIA Co. NASDAQ: NVDA has drawn significant cash, reducing the market's overall buying power. As NVIDIA becomes the sector’s darling today, riding on all the positive headlines regarding artificial intelligence, stocks like Autodesk have more of a gap to fill if they want to play catch up.

Is Autodesk's High Price-to-Book Multiple Justified?

So far, the answer is yes. As of the past week, despite the stock split hype and everything else, Autodesk stock has outperformed NVIDIA stock by as much as 4%. Hoping this trend continues would be a futile investment strategy, so here are a few reasons why Autodesk has a few more yards to run forward.

On a price-to-book (P/B) multiple basis, Autodesk’s 23.3x valuation is above peers like PTC Inc. NASDAQ: PTC and Synopsys Inc. NASDAQ: SNPS by as much as 120%.

Justifying these valuations comes the current analyst projections for earnings per share (EPS) growth of up to 15.5%, which seem to be on the conservative end of the spectrum when investors consider past performance in the company.

Inside the company’s quarterly earnings press release, investors can see that management boosted their guidance for 2025 to challenge these analyst outlooks. The company expects to see up to $5.9 billion for billings alone, representing 15% annual growth.

Operating margins expanded by 4% on top of 12% revenue growth, signaling that the industry’s profit cycle could be on a comeback to push out even more aggressive EPS growth for companies like Autodesk. Knowing this, some on Wall Street decided to boost their views.

Those at KeyCorp felt comfortable valuing Autodesk stock at $305. To prove these analysts right, the stock must rally roughly 25% from its current level. Today’s price is only 87% of its 52-week highs, below the software industry’s 92% average.

The Real Estate Cycle: A Key Factor in Autodesk's Unexpected Success

The latest round of ISM services PMI index reports shows that one industry is driving the recent breakouts in business activity: real estate.

But how is a real estate breakout linked to a tech company like Autodesk? This stock offers the housing industry a better—and cheaper—way to render new construction projects using AI, significantly reducing the painful costs of fixing a lousy blueprint that underwent construction.

Knowing that it is go-time in the construction industry, managers hired up to 21,000 workers, as seen in May’s employment situation report (NFP). More than that, Warren Buffett had been buying homebuilding stocks like D.R. Horton Inc. NYSE: DHI and others in the space, hoping to ride on what is happening today.

Rising U.S. home listings and declining multifamily property values are incentives for would-be homeowners who have had to wait out the cycle-high mortgage rates.

Also, now that the Federal Reserve (the Fed) is proposing interest rate cuts this year, seemingly by September, according to the CME’s FedWatch tool, future homeowners will have an additional incentive to buy at more affordable financing rates.

To crystalize these trends, architecture, engineering, and construction (AEC) segments showcased revenue growth of 16% over the year to drive the bulk of results. Investors could expect continued performance in upcoming quarterly earnings since the industry is arguably in the early stages of re-heating.

This makes for an upside cocktail that could help Autodesk stock reach higher prices. This is also why two of Autodesk’s largest shareholders, the Vanguard Group and Price T Rowe Associates, boosted their stakes in the company over the past quarter.