ADSK Stock Forecast: Why Investors Should Raise Their Bets On Autodesk

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First


  • I reiterate my buy rating for Autodesk’s stock. May last buy endorsement for it was last September. ADSK’s price has shot by up by 33%.
  • The strong growth in software subscription fees indicates Autodesk has found a better sustainable business model than selling boxed software.
  • The fast-growing global video games industry is a strong tailwind for Autodesk. Game developers rely heavily on Autodesk 3D software products for creating game assets and special effects.
  • AutoCAD and other architectural/BIM software products of Autodesk have a massive tailwind from the $11 trillion/year global spending on construction.
  • I Know First’s stock picking algorithm has a bullish one-year market trend forecast for Autodesk’s stock.

I rated Autodesk (ADSK) as a buy last September. ADSK’s price has shot up from $102 to $136.  Autodesk’s stock even set a new 52-week high of $141.26 last March after it reported its Q4 Fiscal Year 2018 earnings and revenue performance. Investors liked the 106% year-over-year increase in Autodesk’s Annual Recurring Revenue [ARR] from subscription plans.

The one-year return of ADSK is now 42.76%.

I want to reiterate my buy rating for ADSK. Autodesk only has 2.27 million subscription plan subscribers. The stock therefore has more upside potential because more perpetual maintenance license customers of Autodesk will all shift toward subscription plans. Autodesk saw 168,000 maintenance subscribers converted to subscription plans in Q4 FY 2018. This number could rise higher for the next quarters.

The release of new AutoCAD and other 3D modelling software products should encourage more maintenance subscribers to convert to subscription plans. The best features of AutoCAD 2019 are now only available as a subscription plan offering. Even if they pay their usual maintenance license fee, perpetual AutoCAD license owners won’t be able to use AutoCAD 2019’s One AutoCAD toolsets if they do not convert to subscription plans. By withholding important new features and updates, Autodesk is compelling perpetual license customers to switch to subscription plans.

AutoCAD 2019’s annual subscription fee was also increased from last year’s $1,470 to $1,575. This should help Autodesk’s bottom line for the next four quarters of FY 2019. Autodesk has been posting net losses since 2016. The turnaround will likely come when subscription plans reach 4 million or more customers.

(Source: Morningstar)

Going forward, when all Autodesk products are only available via subscription plans, software piracy will stop or greatly minimized. The current problem right now is that millions of people are still using pirated versions of Autodesk software programs. This headwind of software piracy will evaporate after Autodesk completes its full transition from boxed software vendor in to a SaaS (Software-as-a-Service) company.

Becoming a pure SaaS company like Adobe (ADBE) is right now could hasten ADSK’s rise beyond $150 price level. I have a one-year price target of $155 for ADSK. This is slightly higher than TipRanks’ average one-year PT of $153.23.

(Source: TipRanks)

Fast-growing Video Games Industry Is A Tailwind

Autodesk’s 3D software programs like Maya, Mudbox, Flame, and 3Ds Max are the industry-standard tools for game developers. Most games made for the PC, console, or mobile platforms used Flame, Mudbox, Maya, or 3DS Max to composite game assets, model and animate characters, and create game environments and levels.

The video games industry is still a fast-growing opportunity for Autodesk. Newzoo estimates that the global video games industry will enjoy average CAGR of 11% until year 2021. Newzoo believes people around the world will spend $137.9 billion on video games this year. This global spending will grow to $180.1 billion by year 2021.

Autodesk has obvious long-term benefits from providing the most popular game development tools. Game developers and 3D compositors will not mind paying $4k/year license of Autodesk Flame because they know it can help accelerate their workflow. The faster video games are made, the better chances they can hit commercial success.

The Global Construction Industry Is Another Tailwind

The early success of Autodesk came from its Computer Aided Design [CAD] software. Millions of architects, civil engineers, building contractors, and draftsmen rely on AutoCAD. The opportunity in CAD software is even greater than the one found in video games. AutoCAD is the industry standard software that helps the multi-trillion global construction industry rolling.

G2Crowd, a user-centric software survey firm, still identifies AutoCAD as the most-used building design software. Autodesk’s Revit software is also the most-used BIM (Building Information Management) software. AutoCAD Civil 3D is also popular for civil engineering projects.

(Source: G2Crowd)

Investors should raise their bets on ADSK because it has industry-standard software packages which are used in the multi-trillion global construction industry. Statista believes the world will spend $11.4 trillion on construction projects this year. It will grow to $14 trillion by year 2025.The CAD software products of Autodesk have a reliable, growing source of revenue from the growing global construction industry. In spite of the availability of many cheaper (or free) alternatives, AutoCAD and its related products remain the most adopted tools by construction industry professionals.

AutoCAD remained popular in spite of the unhampered availability of the more affordable Chinese clone product, ZWCAD.


I remain long ADSK because I understand its long-term potential as the provider of industry-standard software products for the video games and construction industries. Autodesk’s 3D software tools are also being used in TV shows and movie production. These three growing industries assures the long-term prosperity of Autodesk.

ADSK is a strong buy especially now that hedge fund managers have a very positive outlook for it. Mutual funds and other institutional investors will likely heed the bullish sentiment of hedge fund players over Autodesk stock. As more big investors rally behind ADSK, the more chances it can post a new 52-week high before 2018 ends.

(Source: TipRanks)

Its bullish one-year algorithmic market trend forecast score backs up my strong buy rating for ADSK. As you can see from the chart below, I Know First’s stock picking algorithm has a 1-year predictability score of 0.79 for Autodesk’s stock. It means I Know First has a great history of correctly judging the 12-month return of Autodesk’s stock.

Past I Know First Forecast Success With Autodesk

On May 23, 2017, I Know First Research published a bullish article about Autodesk. In the article, the author discussed Autodesk’s successful transition of its software products to the Software-as-a-Service business model and its meaning for continuing domination of CAD and 3D design software. Also, the author analysed why monthly/annual subscription-based software distribution may be a great way for Autodesk to minimize the impact of software piracy. Since the forecast date ADSK has returned 20.16% in almost 1 year in accordance with the I Know First algorithmic forecast.



This bullish forecast for ADSK was sent to I Know First subscribers on May 23, 2017

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I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

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