Autodesk Stock: Profitable Growth, Potential Long-Term Catalysts

Shares of popular architecture, engineering, and construction (AEC) software developer Autodesk (ADSK) have done virtually nothing for well over a year. With the recent weakness in tech stocks, ADSK stock has sunk into bear-market territory, now down around 25% from its all-time high, just shy of $350 per share.

Though the company is still quite pricey on a trailing earnings basis, with a 43.8 trailing price-to-earnings multiple, many may be quick to discount the intriguing innovations under the hood that go beyond just serving the AEC industry. Indeed, creatives have embraced the company’s incredibly powerful but tricky-to-learn Maya software.

With more creative software and tools on the horizon, it’s tough not to be bullish on the firm’s push further into the creative market.

Autodesk: Long-term Growth Potential Beyond the Cyclical AEC Scene

While AEC remains Autodesk’s bread and butter, the creative scene is definitely worth watching over the next decade, as demand for digital metaverse assets looks to go on a potentially sharp uptrend.

Despite the potential boost to Autodesk’s 3D modeling business, Autodesk is far from a pure-play metaverse firm. That said, its longer-term boost to the creative side of Autodesk’s business could have the potential to be very compelling.

With some of the best modeling products in the industries it serves, Autodesk is a wide-moat tech stock. Its innovative capabilities only help to further widen its moat, as potential industry tailwinds may kick in over the coming decades.

Though Autodesk stock seems fully valued, even after over a year of consolidation, I think it looks like one of the cheaper growth plays in the Nasdaq 100 today. As such, I remain bullish on Autodesk stock.

Strong Third Quarter; More Positive Surprises Could Be in the Cards for 2022

Although recent stock price action in ADSK may suggest otherwise, Autodesk has been incredibly resilient in the face of COVID-19 headwinds in 2021.

The company clocked in 18% sales growth alongside 28% non-GAAP EPS growth for Fiscal Q3 2022. The mild bottom-line beat shouldn’t have been met with so much pessimism. The results themselves were solid, but it was management’s prudent caution on future growth that had investors in a bit of a panic.

Given Autodesk’s track record of bottom-line beats and management’s knack for erring on the side of caution, I’d argue that Autodesk is right to have a downbeat tone in the face of such profound uncertainty.

You see, the AEC industry can be sensitive to macroeconomic fluctuations. Given this, muted expectations with the potential for positive surprises may be a better course of action than overpromising with the chance of underdelivering in the future.

Though COVID-19 risks are still elevated, one shouldn’t rule out the potential for positive surprises, given the cyclical nature of AEC can work both ways.

Given Jamie Dimon thinks the economy could be strong enough to stomach more than four rate hikes this year, it’s arguable that a cyclical upswing is likelier than a sustained downturn. If that turns out to be the case, Autodesk could have room to the upside after a year of growing into its previously elevated multiple.

Wall Street’s Take

Turning to Wall Street, ADSK stock comes in as a Strong Buy consensus rating. Out of 16 analyst ratings, there have been 13 Buys, two Holds, and one Sell recommendation assigned in the past three months.

The average Autodesk price target is $340, implying 31.2% upside potential. Analyst price targets range from a low of $250 per share to a high of $440 per share.

The Bottom Line on Autodesk

Autodesk has the bar set relatively low ahead of it such that a breakout move at some point in the future seems plausible.

In any case, the under-the-radar tech firm could get its groove back should management’s recent warning prove less warranted. With the wild card of the metaverse and its potential positive impact on Maya, the risk/reward on ADSK stock hasn’t looked this intriguing in quite a while, in my humble opinion.

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