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What could help Autodesk’s share price to keep gaining?

Autodesk’s [ADSK] share price has gained 52.74% over the past 12 months (to 22 January’s close). After trading in the $230 to $250 range last summer, the stock accelerated in October, gaining 30% by the end of 2020 before closing at a high of $320.13 on 12 January. Since then, the rally has cooled somewhat, with Autodesk’s share price settling at $299.17 on 22 January.

So, could the rally restart, or is Autodesk’s share price set to slip further?

 

 

Why should investors care about Autodesk’s share price?

Autodesk is a world leader in design software. Even if you have never heard of the company, the chances you will have visited, worked in or even lived in buildings planned, designed and visualised using its AutoCAD product — one of the first computer-aided drawing programs to help architects work digitally.

Autodesk has recently been expanding its line up through a series of acquisitions, making five in the last three years alone. The latest is Norwegian start-up Spacemaker, which uses cloud-based AI to help architects make informed design decisions, while saving time and money.

“Spacemaker really stands out in terms of applying cloud computing, artificial intelligence, data science, to really helping people explore multiple options and come up with better decisions,” said Andrew Anagnost, CEO and president of Autodesk.

 

“Spacemaker really stands out in terms of applying cloud computing, artificial intelligence, data science, to really helping people explore multiple options and come up with better decisions” - Andrew Anagnost - Autodesk CEO and President

 

Autodesk picked up Spacemaker for $240m in an all-cash deal. According to TechCrunch’s Steve O’Hear, Autodesk will keep Spacemaker as an autonomous unit, providing resources without “interfer[ing] too much with the formula and start-up ethos that has seemingly been working.”

It is Autodesk’s ability to acquire complementary products and then cross sell them to its customers that has caught investor attention. If this continues, Autodesk’s share price could continue to climb along with revenues.

 

How has Autodesk been performing?

Given the pace of its gains, Autodesk has a pricey 155.17X trailing price to earnings multiple. That said, third quarter earnings saw earnings come in at $1.04 per share, beating Wall Street’s expected $0.80. Revenue also topped expectations, jumping 13% to $952m. The bulk of that came from subscription plan income, which accounted for $884m in revenue, a 24% increase on the previous year. Autodesk raised its full-year guidance to between $4bn and $4.1bn in revenue. 

 

$4 billion-$4.1billion

Autodesk's FY revenue guidance

 

What do the analysts think?

Wall Street has taken notice of Autodesk’s ability to bundle products together to maximise revenue. In December, JP Morgan analyst Sterling Auty upgraded his rating on the stock from underweight to overweight, while pinning a $345 price target on the stock.

“We think the company is positioned well given its longstanding presence in the architecture and building information management (BIM) spaces, which present strong opportunities for cross and upselling. The stock also offers an attractive valuation compared to its peers,” wrote Auty in an investor note.

Another commentator who’s keen on Autodesk is CNBC “Mad Money” host Jim Cramer.

“I think that Autodesk is one of the best-run companies in the world,” Cramer said at the start of January. He went on to share his personal view that the stock “is a buy”.

Among the analysts tracking the stock on Yahoo Finance, Autodesk’s share price carries an average $309.68 target, which would see a 3.5% upside to the current share price (as of 22 January’s close).

Of the 23 analysts offering recommendations on Autodesk’s share price, eight rate it a strong buy and 11 a buy. Wall Street expects Autodesk to post earnings of $1.07 per share for the fourth quarter, up from the $0.92 seen for the same period last year. 

 

Market cap $65.784bn
PE ratio (TTM) 155.17
EPS (TTM) 1.93
Quarterly revenue growth (YoY) 13.00%

Autodesk's share price vitals, Yahoo Finance, 25 January 2021

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