Autodesk: Ditch This High-Flying Stock

May 24, 2019 12:04 PM ETAutodesk, Inc. (ADSK)8 Comments
Gary Alexander profile picture
Gary Alexander


  • Shares of Autodesk crumbled nearly 10% in after-hours trading after reporting a miss on Q1 revenues and EPS.
  • Billings and ARR growth remained strong at 40% and 33% y/y respectively, though the latter decelerated one point from last quarter.
  • Autodesk's growth in FY20 is heavily subject to risk in the slowing construction sector, which has become a greater portion of revenues since the acquisition of PlanGrid.
  • Autodesk's double-digit forward revenue valuation continues to weigh on the stock's capacity to rally further.

After enjoying a seemingly uninterruptible rally throughout the year, shares of Autodesk (NASDAQ:ADSK) have experienced their first real reckoning alongside the release of its Q1 results. Though investors have long praised Autodesk's growth - both organic and acquisition-driven - as it continues to convert the majority of its revenue base onto subscriptions, Autodesk suffered a substantial disappointment this quarter as revenues came in below Wall Street's expectations. Reality has come to bear on Autodesk - at its ~$3 billion annual run rate, Autodesk's ~30% y/y growth rate isn't safe forever.

Unsurprisingly, shares of Autodesk shed nearly 10% in after-hours trading as the results were published:

Data by YCharts

The question for investors now, however: has Autodesk fallen far enough? Judging by its ~12x forward revenue valuation (which puts Autodesk in the echelon of highest-valued software stocks, alongside other perennial high-flyers like Adobe (ADBE) and New Relic (NEWR)), I'd say there's plenty more risk on the downside for this stock.

Watch out for slowing growth this year

Autodesk's tepid guidance is the first indicator that 2019 may not be Autodesk's year. Here's a look at the company's latest guidance update below:

Figure 1. Autodesk guidanceSource: Autodesk 1Q20 earnings presentation

Autodesk failed to raise its FY20 outlook this quarter, sticking to its original forecast of $3.25-$3.30 billion in revenues, representing a growth range fo 26-28% y/y (six points weaker at the midpoint versus 33% y/y growth this quarter). This disrupts the "beat-and-raise" cadence that investors have come to expect of growth stocks like Autodesk (and in fact, Autodesk didn't manage to beat nor raise this quarter). Wall Street had expected $3.29 billion in revenues, higher than the $3.275 billion midpoint of Autodesk's range.

There are real risks to be wary of as we digest Autodesk's poor growth forecast. The major red flag here

This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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