UBS Remains Sidelined Ahead of Autodesk's (ADSK) 4Q Report

UBS reiterated a Neutral rating on Autodesk (NASDAQ: ADSK), and cut the price target to $45.00 (from $65.00), ahead of the company's 4Q earnings report. A solid Q4 performance is consistent with ADSK's positive pre-announcement. However, the forward outlook is more concerning. While current macro conditions seem unchanged, there were a handful of warning signs. ADSK is scheduled to report 4Q results on February 25th.

Analyst Brent Thill commented, "We are worried about FY17/CY16 fundamentals as poor macro data points accumulate. On the negative side: (1) ADSK is highly exposed to macro with ~70% of revs outside the U.S. and pdts used across many verticals; (2) business model transition (to subs) creates an additional challenge (our prior FY17 forecast was rev down 19% and ~$100M in neg. FCF); (3) revs fell 26% in FY10 during the great recession. On the positive or supporting side: (1) mgmt. has become more serious about cost control with annual opex growth est. at 1-2% from prior 5-6%, not including the recently announced 10% headcount cuts; (2) activist involvement; and (3) recurring revs are 56% of total (as of FQ3) vs. 31% at the end of FY09. Given the current headwinds, we have cut our rev forecast and PT. However, despite the 26% stock decline, valuation is not yet compelling and could have further downside to $40 or below. Our scenarios give a value range in high 30s to high 40s based on a normalized FY20 EPS of $2.57 (our new muted est.) to $3.00 (bullish given ADSK never exceeded $2.00), assuming a P/E of 20-25x and discounted back 3 yrs at 10-15% (note that beta is >2)."

For an analyst ratings summary and ratings history on Autodesk click here. For more ratings news on Autodesk click here.

Shares of Autodesk closed at $44.92 yesterday.

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