By Peet Serfontein & Hashmeel Suka.
Autodesk is a leading developer of 2D and 3D software for design and engineering purposes. The company offers productive solutions to individual customers and businesses, through a collection of powerful technological products. These include AutoCAD, Civil3D and Revit, which are used by architects, engineers, and structural designers, as well as manufacturers of automobiles, industrial machinery and consumer products. In addition to this, the company provides software and tools used in digital entertainment and media.
The company has displayed exceptional growth over the past five years. On a compounded annual basis, revenue has increased 16%, with adjusted earnings surging 50%. Growth has been underpinned by a resilient subscription model, supported by healthy end-user and business gains, amid the ongoing adoption of cloud-based software and services.
Technically, the stock price has been building a base over the past few years (refer to the first chart), transitioning from a period of consolidation among investors, into a period of accumulation. This price behaviour has been underpinned by steady demand (and hence robust support) from investors. The stock has also repeatedly tested its resistance level, increasing the chance of a break toward the upside.
The stock seems to be in a markup phase characterised by steady price appreciation following an extended period of accumulation by investors. This is supportive of a bullish view.
Recent sentiment around the stock has been supported by a rapid rise in the Sharpe ratio (a measure of return relative to risk), suggesting that investors have achieved greater returns without incurring any substantial increase in risk. This complements our bullish view.
The stock is trading above the 200-day simple moving average of ~$229. Fading downside momentum, according to the MACD indicator as well as steep upwards movement of the on-balance volume indicator, supports our bullish stance.
Share Information
| Share Code | ADSK US |
|---|---|
| Industry | Software & Services |
| Market Capital (USD) | 52.5 billion |
| One Year Total Return | 17.08%% |
| Return Year-to-Date | 0.01% |
| Current Price (USD) | 243.51 |
| 52 Week High (USD) | 279.53 |
| 52 Week Low (USD) | 192.01 |
| Financial Year End | January |
| The stock is flat on a year-to-date basis. Nevertheless, we expect an imminent break to the upside given various bullish indicators. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 7.60 | 8.12 | 9.05 | 10.41 |
| Growth (%) | 6.88 | 11.39 | 15.10 | |
| Dividend Per Share (USD) | - | - | - | - |
| Growth (%) | - | - | - | |
| Forward PE (times) | 28.72 | 25.44 | 23.38 | |
| Forward Dividend Yield (%) | td>- | - | - | |
| Growth over the long term is expected to remain decent, with additional support coming through from AI-related developments and tools. | ||||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | META US - BUY (Continue to hold) |
MO US - BUY (Continue to hold) |
PNW US - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 474.36 | 43.54 | 73.02 |
| Current | 501.70 | 45.43 | 76.55 |
| Movement | +5.3% | +4.3% | +4.8% |
|
The stock still presents as a tactical speculative investment opportunity. It remains above the 200-day simple moving average (SMA). Fading downside momentum is supportive of our bullish stance.
Our profit target is $555, with a trailing stop-loss of $469. Exit the trade by 19 September 2024. |
The formation of a falling wedge pattern is attractive. The stock remains above its 200-day SMA. Fading upside momentum, however, is a concern.
Our profit target is $48, with a trailing stop-loss of $43.80. Exit the position around 19 July 2024. |
A developing symmetrical triangle remains of interest. The stock remains above the 200-day SMA. Fading upside momentum, however, is a concern.
Our profit target is $81, with a trailing stop-loss of $72.30. Exit the trade by 5 July 2024. |
| Share Name and position | T US - Buy (Continue to hold) |
BLK US - Buy (Continue to hold) |
J US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 17.62 | 766.62 | 139.49 |
| Current | 18.11 | 782.83 | 141.19 |
| Movement | +2.8% | +2.1% | -1.2% |
|
A price testing the upper range of a declining channel pattern remains of interest. The stock remains above the 200-day SMA. Upside price momentum supports the trade strategy.
Our profit target is $20, with a trailing stop-loss of $17.40. Exit the trade by 23 August 2024. |
The formation of a symmetrical triangle pattern within an uptrend is attractive. The stock remains above the 200-day SMA. Fading downside momentum is encouraging.
Our profit target is $849, with a trailing stop-loss of $748. Exit the trade by 31 July 2024. |
The stock is trading within its most frequent price range (per distribution analysis), which remains attractive. Trade continues above the 200-day SAM which is encouraging. Fading downside momentum is supportive.
Our profit target is $155, with a trailing stop-loss of $135.30. Exit the trade by 28 August 2024. |
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