Good Time to Buy Autodesk

I have worked a lot with CAD businesses in their various forms, so I have a fair bit of visceral knowledge of the market. I own Autodesk stock, and have no intention of selling it anytime soon. With that backdrop, let’s look at its most recent financials and business metrics.

Autodesk (ADSK), the leader in 3D Design automation, recently announced its Q4 results. With Q4 revenues of $599 million, it beat market expectations of $581 million, and grew 20% over the previous year Q4 revenue of $497 million. EPS for the quarter at $0.52 was marginally lower than market expectations of $0.54, and increased by 17% over the previous year.

Segment-wise, license revenue grew by 18% to $446 million, and maintenance revenue from subscriptions grew by 25% to $153 million.

Region-wise, American revenues showed a marginal increase of 2% to reach $206 million, EMEA revenue increased to $262 million recording an impressive 38% increase, and Asia Pacific revenues increased by 24% to $131 million. Emerging markets have been an area of focus for them, and the company's impressive results in the region are proof of its success.

Division-wise, design solutions grew by 19% to $263 million, manufacturing solutions grew by 26% to $123 million, AEC Solutions grew by 22% to $137 million, and the Media and entertainment segment grew by 10% to $71 million.

For the year, Autodesk crossed $2.2 billion in revenue, recording an impressive 22% increase over the previous year revenues.

Autodesk also recorded a substantial double digit increase in the 2D solutions. Management believes that strong growth in 2D creates future opportunity and provides easy migration to 3D products and digital prototyping. It is interesting to see that the 2D market still has growth, but I guess that is at least partially due to uptake in the emerging markets.

Autodesk’s 3D penetration in its customer base still remains under 15%, which means the 2D to 3D conversion opportunity is still spectacular.

The company continues to focus on its project management platform Revit and making interoperable products. It completed three acquisitions last quarter – two technology companies and a provider of outsourced product development.

The technology companies acquired include Robobat and Carmel Software. Both, Robobat, which was acquired for $42.5 million and Carmel Software, were acquired to help build up Autodesk’s suite of software for structural engineering analysis, design, steel and concrete detailing, and expand its portfolio of sustainable design solutions.

The acquisition of Hanna Strategies will help the company expand its global engineering and software development initiatives as Hanna has its centers in China, India and Atlanta.

However, the company still has not acquired a web-based “collaborative design” partner.

Recently the stock crashed to a new 52-week low of $29.58. It has gained ground since, and is currently trading above $33. This might still be a good price to pick up the stock, as I firmly believe in the company and its market. Over time, the gap between high-end and mid-range CAD has closed consistently, and Autodesk’s market opportunity continues to be robust.

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