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Autodesk (NASDAQ:ADSK) stock fell about 6% on Wednesday after Piper Sandler downgraded the stock to Neutral from Overweight and cut the price target to $215 from $240.
The San Francisco-based company reported third quarter results post-market on Tuesday which beat analysts estimates.
The analysts said that had optimistically hoped FY’24 would serve as a trough year for fundamentals as reported growth and free cash flow, or FCF, margins would accelerate next year on the waning effects of foreign exchange, or FX/Russia exit and the multi-year billings transition.
However, based on FY’25 growth expectations of 9%+ and tempered FY’25 margin expectations (driven by new transactional model and $200M of FCF benefit from multiyear billings that still hit in FY24), the analysts noted that their view is substantially less optimistic.
The analysts added that they recognize, looking ahead to FY25, FCF growth should still improve from the FY’24 trough and revenue expectations could rise as the company processes fourth quarter renewals.
Autodesk accelerated ex-FX revenue growth to 13% year-over-year, from 12% in the past two quarters. However, FY’25 commentary regarding 9%+ revenue growth falls below the 10% to 15% sustainable growth target outlined at the Investor Day, according to the analysts.
With consensus largely anticipating growth acceleration next year after the multi-point headwind from FX and Russia this year; the analysts expect this will be viewed negatively, and may take time to rebuild investor confidence in the 10%-15% growth framework.
Autodesk (ADSK) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. Meanwhile the Seeking Alpha authors’ average rating is more positive with a Buy, and so is the average Wall Street analysts’ rating, with a Buy.
