On Friday, Piper Sandler adjusted its outlook on Autodesk (NASDAQ:ADSK) shares, raising the price target to $257 from $239 while maintaining a Neutral rating. The software company has updated its forecast for organic revenue growth in fiscal year 2025, adding an additional $25 million on top of its previous expectations.
This increase is complemented by a $40 million contribution from acquisitions and the implementation of a new transaction model, leading to an anticipated 11% growth in revenue for the full year.
Autodesk also revised its FY billings projection, increasing it by $45 million, which corresponds to a growth rate of 13% to 14%. However, the updated billing forecast includes a 5-6 percentage point contribution from the new transaction model, which implies that the organic growth component of the forecast may not have changed significantly.
The company's commentary highlighted that excluding the effects of the transaction model and foreign exchange (FX) fluctuations, it expects to achieve non-GAAP operating margins of 38-40% this year. This represents a substantial improvement of 300 basis points over two fiscal years, excluding FX impact.
The discussion raises the question of Autodesk's ability to sustain a minimum of 100 basis points of underlying operating margin expansion in the coming years, which would positively influence free cash flow (FCF) expansion.
This financial outlook, particularly the prospects for enhanced growth and margin improvement, has prompted Piper Sandler to increase its price target for Autodesk. The new target reflects the firm's updated expectations for the company's financial performance.
In other recent news, Autodesk has displayed notable financial growth, reporting a 12% year-over-year increase in revenue to $1,505 million in its second quarter of fiscal year 2025. The company's Non-GAAP earnings per share (EPS) were reported at $2.15, surpassing estimates.
Autodesk has successfully implemented a direct customer billing transaction model in North America, with plans to expand this model to Western Europe and Japan. These positive developments have led Autodesk to raise its full year 2025 revenue growth guidance to around 11%.
Analyst firms Rosenblatt, BMO (TSX:BMO) Capital Markets, and Mizuho have all raised their price targets for Autodesk, reflecting confidence in the company's performance and strategic initiatives. Rosenblatt increased its price target to $295, BMO Capital Markets to $287, and Mizuho to $260. However, Mizuho maintains a Neutral rating on the stock, advising caution due to potential macroeconomic headwinds.
Autodesk's diversified portfolio and subscription model have demonstrated resilience, with the company expecting to meet its non-GAAP operating margin target of 38% to 40% in fiscal year 2025, a year ahead of schedule. The company has also seen a 21% growth in direct revenue, which now represents 40% of total revenue. These are the recent developments for Autodesk.
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