Autodesk plunges as Mizuho downgrades after weak billings, free cash flow guidance

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Autodesk (NASDAQ:ADSK) shares plunged early on Wednesday as Mizuho downgraded the software company after a "subdued" third-quarter and concerns over guidance going into what is expected to be a "challenging" year.

Analyst Matthew Broome lowered his rating on Autodesk (ADSK) to neutral from buy and cut the price target to $210 from $260, noting that continued macro uncertainty has "impacted" contracts, even those with multi-year up front terms as customers look to conserve cash.

"As such, full-year billings and [free cash flow] guidance was again lowered (and may still be a stretch), and [management's] discussion of next year's modeling outlook was downbeat, in our view," Broome wrote in a note to clients.

Autodesk (ADSK) shares fell nearly 8.2% to $191.73 in early trading.

Broome added that he is confident in Autodesk's (ADSK) market position, particularly in building design, calling it "strong," but added that it's likely the company faces several near-term issues.

"Given an increasingly uncertain operating environment, we find it difficult to continue recommending the name going into a more challenging [fiscal 2024], and believe that a modest valuation discount to the broader enterprise software group is therefore justified," Broome explained.

Late last month, Morgan Stanley said that software stocks, including Autodesk (ADSK), had underperformed but that significant risk was "priced in."

Analysts are universally positive on Autodesk (ADSK). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts also rate it a BUY. Seeking Alpha's quant system, which consistently beats the market, rates ADSK a STRONG BUY.