Is Autodesk Stock A Buy?

Is Autodesk Stock A Buy? Like most publicly traded companies, Autodesk (ADSK) saw its stock sell off heavily in the beginning of 2020. It continued moving lower as stockholders attempted to decipher how the pandemic would affect not just the ADSK share price but the market and economy as a whole.

Some analysts, however, say that when it seems the whole world is crashing down – that’s the time to buy. Buffett’s famous line “be greedy when others are fearful” is the mantra of the successful long-term investor.

This seemed to be the general conjecture as the contagion saw spirits falling. Many stocks saw their greatest buy signals. Autodesk was among the many companies snapped up by investors at its low point, and has since doubled in value. So is ADSK a good investment now?

Autodesk: The 10,000 Foot View 

Autodesk, headquartered in San Rafael, California, was founded by John Walker in 1982. Walker helped co-invent the very first versions of AutoCAD.

Today, Autodesk software is used around the world for applications in the construction, engineering, and architecture industries.

The company offers several applications and versions depending on the end user’s needs. Their three main Autodesk offerings include:

• Architecture, engineering, and construction
• Product design and manufacturing
• Media and entertainment

The three collections can be purchased individually, and each collection also offers standalone products. For instance, a home builder could purchase just the Construction application if desired.

This approach of allowing consumers to slice and dice the products they want means users can select the exact software product for their specific application.

How does Autodesk make life easier?

In addition to the above, Autodesk also creates educational versions of their software applications so you can learn how to use it before actually making a purchase commitment or for ongoing learning once you’ve bought the product.

Remember when you first used Microsoft Word? Can you imagine how hard it would have been to learn how to use the product to its full capacity without that little “ribbon dude” hanging out in the corner?

Autodesk’s educational products function in much the same way so users can discover the full functionality of their chosen product.

Customers rave about Autodesk’s software but does that mean investors like the company’s stock?

Is Autodesk Stock A Buy?

Looking to the recent past highlights how ADSK share price was chugging ahead at full steam.

In 2019, Autodesk gained 43% beating even the S&P 500’s almost 30% gain for the same period.

2019’s overall results for Autodesk seemed to support those results – Autodesk revenue increased by 22% and earnings (non-GAAP) rose to $803 million, more than double the previous year.

Obviously, though, this was all before a worldwide pandemic struck. Due to fears over the virus, the software creator saw all these gains wiped clean away in less than a month at the beginning of 2020.

In total, Autodesk lost over 33% of its overall value. When looking to the future, however, analysts consensus expectations are that by December 2021, Autodesk stock price could rise to as high as $337.82.

The driver to Autodesk’s long-term strength can be found in a key decision it made in 2015. Software companies, such as Adobe (ADBE) and Oracle (ORCL), have made the switch to subscription-based services rather than the old, stand-alone licenses of yesteryear.

As expected, both earnings and revenue tumbled right after Autodesk transitioned to the subscription model, but as this practice became the norm for so many other software companies, consumers accepted the switch. Over the past five years, profits have grown at an average of nearly 9% each year.

This one small step created steady, annual revenue. Prior to the subscription model, there would be a short-lived surge in revenue each time Autodesk released an updated version of one of its packages.

Over the long term, subscription-based modeling has helped create higher, more steadily occurring revenue streams.

And, as a result, revenue hit its peak in 2019, right before disaster struck. Additionally, when you realize this company has been around since the early 1980s, you can forecast better its longevity and the continued demand for automotive drafting applications.

From the perspective of Wall Street, buying or selling ADSK is a mixed bag:

• 11 Buy ratings
• 4 Hold ratings
• 1 Sell rating

Earning Trend For Autodesk Looks Phenomenal

When you examine hundreds or thousands of stocks, you’ll quickly see a troublesome pattern when attempting to forecast. Earnings don’t rise quarter after quarter for most companies.

For some companies the reason is seasonality. Even Amazon is subject to this kind of spike around holiday seasons and dips in Q1.

Very few companies can demonstrate a trend of consistent, if not perfect growth from one quarter to the next year after year. Autodesk is among the few companies that can claim such a rare feat. And for investors that’s a boon for predicting share price more accurately.

Can Autodesk Competitors Win?

Autodesk has several competitors, but its closest competition lies in rivals like Adobe (ADBE) and Oracle (ORCL). Some even say Apple is a competitor. How do these competitors compare against Autodesk?

Adobe, like Autodesk, also began in 1982. That’s the year when technology really began to take hold. Now, while Autodesk and Adobe aren’t technically in the same competitive space, they do compete within digital media – and Adobe has made strides in recent years.

Oracle saw its user base dwindling and over the past few years decided to completely restructure their offerings. In 2016, the company bought Netsuite to foray into the cloud-computing space. In 2017, it bought out Aconex to put the Oracle stamp on the construction management service arena. Could the big industry gorilla Oracle potentially edge out Autodesk in this respect? So far it’s not looking like its eating Autodesk’s lunch.

Is Autodesk Stock A Buy? – The Bottom Line

In previous downturns, Autodesk also saw demand decline. The year 2020 appears different on so many levels. The pandemic has posed unique challenges for organizations of all types and sizes, and simultaneously opened the door for those companies already striving to upgrade to a digital-first mindset.

That’s precisely the situation of Autodesk. The difficulties arising due to global economic conditions haven’t truly hampered this company. It already made the transition to a model that built a resiliency just for this kind of climate. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.