On Oct 15, 2014, Zacks Investment Research upgraded Autodesk Inc. (ADSK) to a Zacks Rank #1 (Strong Buy). Innovative product portfolio, strong return of approximately 24% over the last one year on improving results and positive outlook make Autodesk an attractive investment opportunity.
Why the Upgrade?
Autodesk continues to invest in expanding its product portfolio that now includes new functionalities like composite analysis technology for its simulation offering. As a result, the company is seeing greater penetration in industries like aerospace and automotive.
Moreover, the company’s focus on expanding its mobile applications for both iOS and Android platform will further drive market share despite stiff competition.
We believe that Autodesk’s new cloud-based offerings are gaining traction. The ongoing transition from license-based to subscription-based business model will boost the company’s profitability in the long run.
In its recent investor day, Autodesk reiterated the third-quarter and fiscal 2015 outlook. For the third quarter, Autodesk expects revenues in the range of $590–$605 million. Non-GAAP earnings are expected in the range of 17 to 23 cents for the quarter.
For fiscal 2015, management expects net billings to grow in the range of 10% to 12% (up from 7% to 9%). Revenues are expected to increase 7% to 9% (up from 4% to 6%), while operating margin on a non-GAAP basis is expected in the range of 15% to 16% (up from 14% to 16%).
Autodesk believes that the momentum from the BIM product portfolio will help it to penetrate the $7.0 trillion construction market fast. Apart from industries like aerospace and automotive, we believe that Autodesk has significant growth opportunities in the AEC and manufacturing markets due to its innovative product pipeline, going forward.
Earnings Estimate Revision
The Zacks Consensus Estimate for fiscal 2015 has remained stable at 71 cents per share over the last 30 days. For fiscal 2016 too, the Zacks Consensus Estimate remained unchanged at 95 cents per share over the same time frame.
Other players in the industry, which look attractive at current levels, include Imperva Inc. (IMPV), ACI Worldwide (ACIW) and Park City Group (PCYG). All these stocks carry the same Zacks Rank as Autodesk.
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