Rosenblatt has sustained its Buy rating on shares of Autodesk (NASDAQ: NASDAQ:ADSK), with a price target of $290.00. The firm's target price suggests a potential return of approximately 16% from the stock's current level. Autodesk, a leader in design software, is Rosenblatt's top choice for the second half of 2024 in its market segment.
The valuation is derived from a blend of methods including discounted cash flow (DCF), enterprise value to free cash flow (EV/FCF), and enterprise value to sales (EV/S) multiples. The firm's analysis indicates that Autodesk's shares are trading at roughly 9.9 times enterprise value to FY25 estimated sales, which is considered below the midpoint for similar companies in the design software industry, typically around 10 times.
Rosenblatt's positive outlook on Autodesk is partly influenced by the actions of activist investor Starboard Value, which is pushing for changes at the company to improve oversight and achieve long-term margin growth. Autodesk is expected to release its second-quarter results for fiscal year 2025 on August 29, 2024, after the market closes.
The $290 price target is based on an estimated 9.5 times enterprise value to sales for the company's FY26, according to Rosenblatt's projections.
In other recent news, Morgan Stanley (NYSE:MS) resumed coverage on Autodesk stock, assigning the stock an Overweight rating and a price target of $305.00, indicating confidence in the company's growth prospects. The firm highlighted potential catalysts for increased demand for Autodesk's products and services, and opportunities for margin expansion.
Simultaneously, Autodesk has been under scrutiny from significant shareholder Starboard Value LP, which has been advocating for substantial changes in company practices, including leadership changes and cost reduction strategies.
Autodesk reported a 12% increase in first-quarter revenue, amounting to $1.42 billion, and adjusted earnings per share of $1.87. These results have led to reaffirmed Outperform ratings from Baird and RBC (TSX:RY) Capital, indicating confidence in the company's resilience.
InvestingPro Insights
As Rosenblatt maintains a bullish stance on Autodesk, a glimpse at real-time data from InvestingPro provides additional context to their valuation. Autodesk's market capitalization stands at a robust $54.56 billion, reflecting its significant presence in the design software market. The company's P/E ratio, a measure of its current share price relative to its per-share earnings, is high at 54.71, indicating investor confidence in future growth despite the premium valuation. Moreover, Autodesk's gross profit margin is impressively strong at 91.73%, underscoring the company's ability to maintain profitability amidst competitive pressures.
InvestingPro Tips highlight several key aspects that investors may consider. Analysts have revised their earnings upwards for the upcoming period, suggesting optimism surrounding Autodesk's financial prospects. Additionally, the company is acknowledged for its impressive gross profit margins, a testament to its efficient operations and pricing power. While Autodesk operates with a moderate level of debt, it is also noted for trading at a high EBITDA valuation multiple, which investors should weigh against the company’s growth potential. For those seeking more comprehensive analysis, InvestingPro offers a total of 15 additional tips on Autodesk, accessible through their platform.
Rosenblatt's target price of $290 aligns with the positive sentiment reflected in Autodesk's recent performance, with a strong return over the last three months of 16.15%. As the market anticipates Autodesk's second-quarter results, the InvestingPro Fair Value estimate of $268.19 provides a benchmark for investors considering the stock's potential upside. With Autodesk's next earnings date on the horizon, the company remains a focal point for investors seeking growth in the tech sector.
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