The 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. 

Autodesk Stock Forecast

Summary:

• Autodesk is a leader in the 3D modelling/animation and CAD/CAM software industries.
• The 3D CAD software industry is growing at CAGR of 5.8%. It will mature to a $13.12 billion/year business by 2025.
• Autodesk is one of the top beneficiaries of the multi-trillion-dollar creative industry. It provides industry-standard tools for content creators/creative professionals.
• Aside from engineering/manufacturing, movies, advertising, TV shows, video games, and mobile apps are also long-term tailwinds for ADSK.
• Buy and hold ADSK right now. I Know First has very bullish algorithmic forecasts for this stock.

The multi-trillion-dollar global creative industry is a compelling reason why you should go long on Autodesk (ADSK). The software products of Autodesk cater to a large part of the overall creative trade. Autodesk’s Fusio360, AutoCAD, Revit, 3D Studio Max, and Maya are industry-standard software programs used for design/content creation for architectural/engineering jobs, video games, advertising, film/TV shows, and mobile apps.

Two years ago, the cultural and creative industry [CCI] was estimated to have generated $2.25 trillion in annual revenue.

(Source: WorldCreative.org)

The reason why ADSK has such a high Price/Sales valuation (12.83x) is because of its leadership in the CAD [Computer-Aided Design] and 3D modeling/animation software sales. As per CnC CookBook, Dassault Systems’ (DASTY) SolidWorks product leads in the overall CAD category. However, if we add up the shares of Fusion360, AutoCAD, and Inventor, Autodesk is now the company with the most products used by CAD professionals.

Autodesk Inventor is actually the direct rival product of Dassault’s SolidWorks. AutoCAD is more of an all-purpose design workhorse.

The 3D CAD software market is growing at a CAGR of 5.8%. It will grow to a $13.2 billion/year business by 2025. My view is that the birth of Virtual Reality and Augmented Reality applications can push CAD software’s revenue growth rate to as high as 8%. Eight years from now the CAD software market might really become a $20 billion/year industry.

Autodesk’s judicious acquisition of HSMWorks five years ago has also made it a leader in CAM (Computed-Aided Manufacturing) software. CAM is a complimentary software partner of CAD. You design products in a CAD software and then you switch to a CAM program to produce those products.

Next only to Mastercam, HSMWorks is the go-to computer-aided manufacturing solution for SolidWorks and Autodesk Inventor. The coming age of 3D printing or additive manufacturing bodes well for Autodesk Inventor and HSMWorks. As 3D printers and materials become more affordable, there will be more demand for CAD/CAM software experts.

The general 3D printing industry (hardware, software, services, and supplies) will experience a CAGR of 25.76% during the 2017-2023 period. Six years from now, the 3D printing industry will be worth $32.78 billion.

Autodesk’s Diversified Portfolio

Further, DASTY has no real answer to Autodesk’s 3D Studio Max and Maya, both are also staple in many commercial applications. They are used in video games, movies, TV shows, advertisements, and industrial/product design. Autodesk clearly has a much larger total addressable market (than Dassault Systemes). Autodesk is not overly reliant on CAD/CAM products.

The long-term prosperity of Autodesk benefits from selling software that allows special effects or CGI (Computer Generated Images) in movies and TV shows. It is now cheaper and faster to just model, animate, and composite virtual worlds than to create multi-million dollar movie sets. Going forward, Autodesk’s Maya and other software programs will produce ultra-realistic 3D human models that there would less need for real human actors.

Further, Autodesk software is also a must-have for game developers. The fast-growing global video games industry needs Maya/3D Studio MAX to create better 3D models and animation. Using Autodesk software, game developers can exploit the photorealism rendering feature of new GPUs (Graphics Processing Unit). Nvidia’s $800 GTX 1080 Ti is among the best-selling video cards at Amazon (AMZN) because most players want their games to have the best graphics quality.

The video games industry now generates around $109 billion in annual revenue. This is predicted to grow to $128.5 billion by 2020.

Mobile is now the biggest growth driver for video games because the latest smartphones like the iPhone 8 have console-like processors and GPUs to run PC-level 3D games. Since 2013, Autodesk has been catering to mobile games developers.

Conclusion

Software developers like Autodesk and Dassault Systemes fuel the creative industry. Investors value DASTY and ADSK so highly because they have a base of loyal customers catering to lucrative niche markets. Autodesk is therefore worth adding to your long-term portfolio.

As long as the world has an insatiable appetite for entertainment and product manufacturing, Autodesk will find many subscribers to its 3D modeling/animation and CAD/CAM products.

I Know First has very optimistic near and long-term algorithmic forecasts for Autodesk. Betting big on this software giant is justified. My 12-month price target for ADSK is $130. This is slightly higher than the $127.44 average price target of TipRanks-tracked Wall Street analysts.

Past I Know First Success With ADSK

I Know First has been bullish on ADSK shares in past forecasts. On September 2, 2016, an I Know First Analyst released a bullish article for ADSK. Autodesk has changed its business strategy to subscription-only software licensing/selling. As a result, the company has benefited from strong growth in subscribers and sales. Its dominance in the 2D/3D Cad software is another reason to be bullish of the stock. Since the forecast’s release, ADSK shares have gained 65.72%. See chart below.

(Source: Google Finance: ADSK)

This bullish forecast for ADSK was sent to I Know First subscribers on On September 02, 2016. To subscribe today click here.

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.