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Wednesday, 02/07/2018 12:49:06 PM

Wednesday, February 07, 2018 12:49:06 PM

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>>> Autodesk stock slides 18% after mixed quarter, but analysts are unfazed

By Emily Bary

Nov 30, 2017

Software maker surprised investors with news of plan to cut more than 1,000 jobs

Autodesk Inc.’s stock tumbled 18% in Wednesday trading, after the company posted mixed results for its fiscal third quarter and announced that it was cutting more than 1,000 jobs as part of a surprise restructuring plan.

The software maker ADSK, -0.12% reported a net loss of $119.8 million for the quarter, on revenue of $515.3 million, which came in above analysts’ estimates for $116.4 million and $513.6 million respectively. But Autodesk only added 146,000 net new subscribers during the period, below expectations for 147,000, and slightly lowered its full-year forecast for that metric.

Analysts, who were a bullish bunch heading into the earnings report, for the most part weren’t troubled by the subscriber miss or restructuring announcement.

“In our opinion, the reason for the weaker-than-expected subscriber and billing metrics was the emergence of larger enterprise customers,” wrote analysts at William Blair, who have an outperform rating on Autodesk shares.

“These customers are skewing the company’s business model toward fewer new subscribers and larger deals extended over multiple years, resulting in increasing unbilled deferred revenue ($148 million in the third quarter versus $63 million in the prior quarter).”

Analysts at Morgan Stanley also urged investors not to read so much into the subscriber miss, since the company is on a path to nabbing more “higher value” customers. The group there said Wall Street may be trying to compare Autodesk’s transition to a subscription model to a similar one made by Adobe Systems Inc., when in fact Autodesk’s is more complicated.

“The Autodesk transition story was never going to be as straightforward as Adobe’s, where subscribers and the average revenue per subscriber told most of the story,” wrote the Morgan Stanley analysts, who have an overweight rating and a $143 price target on the stock.

“The complexity of Autodesk’s model, with multiple types of subscriptions, a much broader set of products, and more complex set of promotions and bundling became readily apparent in Q3 when net subscription adds fell short of consensus expectations, but the Autodesk management team still proclaimed a solid quarter,” they wrote.

Morgan Stanley thinks that the job reductions could help the company yield almost $6 a share in free cash flow for the 2020 fiscal year, the company’s target.

Autodesk has 18 buy ratings, four hold ratings, and two sell ratings from analysts polled by FactSet. Despite Wednesday’s drop, shares have still gained 46% this year, compared with a 17% rise for the S&P 500 SPX, +0.61% in that time.


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