Autodesk Stock Forecast: Autodesk Can Shoot Up To $200

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

Summary:

  • The 15.3% one-day in Autodesk’s surge post-earnings validated my May 2018 call for investors to raise their bets on this company.
  • Like Adobe before it, Autodesk is eventually going to reap stronger cash flow and profitability from going full-bore on software subscription.
  • Autodesk only went all-out on software subscription last June 2017. As of July 31, 2018, Autodesk now touts 2.86 million software subscribers.
  • All or most of Autodesk’s customers will likely switch to subscription. Subscription will turn out to be more cost effective than perpetual license maintenance contracts.
  • Autodesk’s stock has a very bullish 12-month algorithmic forecast from I Know First. I Know First’s AI has a great history of correctly predicting one-year performance of ADSK.

The 15.3% surge in Autodesk’s (ADSK) stock price last August 24 was a massive seal of approval from the market. Retail and institutional (which owns 96% of ADSK float) obviously liked it that Autodesk’s quarterly recurring revenue from subscription jumped from $196.1 million to $420.6 million. New subscribers are signing-up and many individual/corporate customers of Autodesk are switching from their maintenance contracts to full subscription-only.

(Source: Autodesk)

Its latest earnings report said Autodesk signed-up 290,000 new subscription plan subscribers. Out of that number, 119,000 are maintenance plan subscribers who switched to subscription plan. As per its FY 2019 Q2 (ended July 31, 2018) report, Autodesk now touts 2.86 million subscription plan customers.

The 22% increase in year-over-year quarterly revenue ($611 million versus $501.8 million) again confirmed that Autodesk is not losing customers to rivals (due to its complete switch to subscription-only software distribution). The emerging reality is Autodesk is gaining more customers because it is affordable to rent software on a month-to-month basis than to pay $5,000 outright to use a perpetual license of AutoCAD or Revit.

Autodesk also apparently heeded my 2015 advice that AutoCAD subscription should be made cheaper. Renting AutoCAD now only costs $195/month, down from 2015’s $210. Perpetual license maintenance plan owners can also avail of the 25% discount if they switch to subscription.

Profitability Is Coming Soon

I am not worried about the continuing net loss (GAAP-based) of Autodesk. It is akin to early to Adobe’s early struggle when it fully switched to subscription-only software marketing in 2013. After the initial growing pains, Adobe’s net income from 2013 to 2018 vastly improved as most of that company previous 12.8 million installed users switched to subscribing to Creative Cloud.

Autodesk’s switch to 100% SaaS (Software-as-a-Service) came later than Adobe and it is being dragged slower by the old license maintenance plan business. Autodesk’s return to profitability will happen faster if most (if not all) maintenance plan owners switch to subscription plans. The incentives that Autodesk offers to current maintenance plan subscribers to switch are definitely accelerating this transformation to a full-pledged SaaS company.

The Carrot or Big Stick Strategy is Working

Autodesk’s June 2017 offer to license maintenance customers to switch to subscription to avail of discounts (like the current 25% discount offered) was very effective. The tardy maintenance plan switchers will see their discounts drop to 20% next year. Autodesk will not offer subscription fee discounts to maintenance plan customers by 2020.

The specter of Autodesk eventually making maintenance plan renewal more expensive beyond 2020 is compelling reason for customers to switch to subscription.

Autodesk clearly said last year that renewable of maintenance plans will increase 10% this year and 20% in 2019. It has not yet announced any planned increase in 2020 and beyond. However, Autodesk could possibly increase maintenance plan renewal fees again after 2019 to compel hold-outs to switch to subscription.

Like what happened to Adobe, the anger/complaints over Autodesk’s complete switch to the SaaS model will quickly fade away. Paying $195 per month for AutoCAD is just pocket change for architects and engineers who make $60k/year. The bottom line is Autodesk can continue making its CAD/CAM software products cheaper to rent to attract more subscribers.  My fearless forecast is that dropping the monthly fee to $160 will compel those remaining 1 million+++ maintenance plan subscribers to finally switch to subscription.

Conclusion

I reiterate my May 13, 2018 buy rating for ADSK. I believe this stock has the momentum to hit $200 by end of 2019. By that time, Autodesk will likely have around 5 million subscription plan subscribers. There is no reason to believe that Autodesk will still operate at a net loss once it has completed its transformation into a full-pledged SaaS company.

Further, my fearless forecast is that Autodesk will remain a near-monopoly on CAD/CAM software. Jon Peddie’s chart below illustrates that the $8 billion/annual CAD/CAM software industry will remain consistent until 2021. While it is not yet a major contributor, the Visualization and Simulation software solutions of Autodesk could become a future tailwind too.

(Source: Jon Peddie Research)

The very bullish one-year algorithmic forecast from I Know First supports my optimism for Autodesk stock forecast. The stock market forecast artificial intelligence of I Know First has a high 0.85 predictability score when it comes to ADSK. It means I Know First touts a long history of accurate one-year predictions for Autodesk’s stock market trend.

I checked out the technical and moving averages trend of Autodesk’s stock. They hint going long on ADSK is the right thing to do right now.

(Source: Investing.com)

Past I Know First Forecast Success With Autodesk

On September 17, 2017, I Know First Research published a bullish article about Autodesk. In the article, the author discussed whether it is worth to add Autodesk as one of the stocks for long term investment portfolio. The article presented Autodesk performance in the light of 3D CAD software industry growing trend which was at CAGR of 5.8%. We also noted that according to analyst community estimates, this market would mature to a $13.12 billion/year business by 2025.

Since September 15, 2017 when we provided this Autodesk stock forecast to our clients, Autodesk stock has returned 36.14% 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 September 17, 2017

Please note-for trading decisions use the most recent forecast. Get today’s forecast and Top stock picks.

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 simplification 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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