Analysts look for this tech company to grow by triple digits over the next five years.
Autodesk (ADSK)
From Cabot Growth Investor
Autodesk (ADSK), is following in the footsteps of Adobe by taking a dominant position in a big market (in Autodesk’s case, 2D and 3D design software) and switching to a cloud- and subscription-based business model. That hurts revenues in the short run (ADSK’s earnings have been negative each of the past four quarters as sales have shrunk each quarter!) but boosts per-user value to the company over time.
Indeed, the firm’s “new model” subscriptions have leapt to 1.59 million at the end of July (up 20% from the prior quarter), while annualized recurring revenue was $1.83 billion (up 23% from a year ago on a currency-neutral basis). And there’s still a bunch of legacy subscriptions to convert in the quarters ahead.
As management has executed on its plan, the stock has responded, and the top brass believes it has a huge opportunity—its long-term plan calls for more than $6 per share of free cash flow in 2020 and more than $11 in 2023. Also, note that both of those estimates were hiked meaningfully last year (so they could prove conservative).
The stock took a breather from May through early October, and ADSK just hit new RP peaks this week. A dip back into the high 100s would be a red flag, but right here, we think ADSK is early in a new upmove.
Earnings are due out on November 28. We’re going to take a 10% position in the stock—i.e., will put 10% of the portfolio’s value in ADSK. BUY.
Michael Cintolo, Cabot Growth Investor, www.cabotwealth.com, 978-745-5532, November 1, 2017