There’s An Institutional Bottom In Autodesk

Highly-Valued Autodesk Moves Up On Strong Guidance 

The price action in Autodesk (NASDAQ: ADSK) has put in a bottom but we don’t think investors should rusk into the stock. While the Q1 results were better than expected and the guidance favorable the margin of outperformance was tepid and the guidance in line with consensus estimates. With the stock already trading at 32X its earnings in an uncertain economic environment we can’t help but think the growth is already priced into the market. 

The 19 analysts with current ratings on Autodesk have it pegged at a Buy but the sentiment is slipping and will cap gains in the near-term to short-term. At least 7 analysts covering the stock have come out with commentary since the Q1 release and the news is not good. One of the analysts reiterated a Buy rating and price target while another boosted their price target but both are below the Insidertrades.com consensus price target. As for the other 5, they all lowered their price targets and to a narrow consensus well below the Insidertrades.com $263.45 price target. That target is, however, down in the 12, 3, and 1-month comparisons and we think trending lower in the near-term at least.

The institutions like Autodesk, no matter the analysts or the Q1 results. The institutions have been net buyers for the last 11 consecutive quarters and their activity has been ramping over the past 3. Institutional activity netted an amount worth 10% of the current market cap over the past year with fully 300 basis points of that amount acquired in the YTD portion of 2022. The institutions now hold nearly 90% of the company and that figure could grow by the end of the calendar quarter. 

Autodesk Q1 Results Were Priced Into The Market 

Autodesk had a great quarter with both revenue growth and margin expansion. The company reported $1.17 billion in net revenue for a gain of 18.3% over last year. The revenue also beat the market consensus but by only 175 basis points. The gain was driven by double-digit advances in all regions led by strength in the U.S. and “other” Americas. On a product-type basis, Design revenue grew by 16% while Make revenue grew by 18% and that is not the end of the good news. 

Moving on to the margin, the company expanded both the GAAP and adjusted operating margin with the adjusted operating margin up 600 basis points This left the adjusted EPS at $1.43 or $0.09 better than expected and up nearly 40% compared to last year but there is bad news in the guidance. The company upped its guidance for revenue to a range of $1.22 to $1.24 billion which compares favorably to the $1.22 billion consensus estimate but the strength will not carry through to the bottom line. The company is expecting an adjusted EPS of $1.54 to $1.60 versus the $1.60 market estimate which suggests to us the news was already priced into the market. 

The Technical Outlook: There’s A Ceiling In Place For Autodesk 

Price action in Autodesk has been in a steady downtrend since hitting its peak in 2021 but that trend is over. The caveat is that price action will likely be capped at or near the $250 level unless there is a change in the fundamentals. The company is growing but the growth is well priced into the stock and we don’t see the possibility of an upside surprise right now. On a technical basis, the next hurdle for the market is the recent high-water market near $220. If the market can get above that level a move up to the $250 level is possible. If the market can not get back above $220 range-bound trading between $180 and $220 is expected. 

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