Autodesk, Inc. ADSK hit a new 52-week high of $65.78 in yesterday’s trading session, though closing a tad lower at $65.29.The increase in price target by an analyst led to the rise in shares.
Autodesk’s ongoing business transition (from licenses to cloud-based services) is boosting its subscriptions and deferred revenues, which are expected to benefit it in the long run as well.
Furthermore, investors’ confidence was also boosted by the fact that the company continues to expect a CAGR of 20% in subscription from 2016 to 2020. Also, the company stated that it will likely lead to growth of 24% in annualized recurring revenues during the period.
The company is primarily banking on cloud transition to fuel this growth, which is further supplemented by increasing demand for licenses, a large active customer base of 2.8 million (including non-subscribers as well) and scope for conversion of non-subscribers to subscribers. For this, the company will also be offering its subscription services packages for a smaller timeframe (at present it only offers perpetual licenses, which are expensive for short-term users).
Moreover, in the last reported quarter, Autodesk finally achieved breakeven earnings and also raised its earnings guidance for fourth quarter 2015, despite an expected softness in billings. In the three-month period, the company has returned over 39% compared with the S&P 500’s gain of only 6.2% in the same period. Morever, in the past 30 days, upward estimate revisions have pushed up the Zacks Consensus Estimate for 2016 by over 133% to 14 cents a share.
Nonetheless, ongoing investments in cloud-based infrastructure and discontinuation of perpetual license offerings in 2016 can prove to be dampener in the near term.
Autodesk sports a Zacks Rank #1 (Strong Buy). Some other top-ranked stocks in the same space include Citrix Systems, Inc. CTXS, Nuance Communications, Inc. NUAN and Cadence Design Systems Inc. CDNS.
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