Autodesk (ADSK) makes software that helps people design things—buildings, cars, gadgets, factories. To state the obvious, when the economy slows, people buy less stuff. And people who make things logically slow their purchases of software to make new stuff.
And that’s why Autodesk shares are getting crushed today. On Tuesday afternoon, the company announced earnings for its fiscal second quarter ended in July that were perfectly fine, but then Autodesk reduced its full year guidance, gently cautioning that slowing demand could reduce its growth in the back half of the year.
More or less the entire Autodesk analyst posse cut their price targets on the company on Wednesday. Bank of America Merrill Lynch analyst Kash Rangan went one step further, cutting his rating on the stock to Underperform from Neutral and chopping his target to $127 from $170, pointing to weakness in both manufacturing and construction in a few key markets, including the U.K., Germany, and China. At least 11 other analysts cut their target prices on the stock
Canaccord analyst Richard Davis kept a Buy rating on the stock while cutting his target to $160 from $190. “Our commentary on ADSK remains the same as it has been for the past few months,” he writes. “If you do not expect a recession in 2020, this stock is too cheap on most metrics ...We do not expect a recession in 2020, we expect ADSK to rally, perhaps a lot for the next few months, but we are worried about a recession in 2021, so it is possible that ADSK is a shorter-term buy than a longer-term one.”
Citigroup’s Tyler Radke likewise kept a Buy rating, but he remains cautious. “Autodesk is not immune to the impact of a weaker macro environment,” he writes in a post-earnings research note. “While we continue to see more resiliency under a subscription model, a meaningful downturn would have a negative impact to our estimates and long-term targets.” He trimmed his target price to $186 from $210.
J.P. Morgan’s Sterling Auty confirms that “results in the quarter were great with beats from top to bottom,” but that “management is seeing signs of macro concern” in the UK, EMEA, and China. “So to be proactive, they are cutting guidance a modest amount, but not taking meaningful steps that would indicate any concerns lingering from the macro perspective. We like the initial cut, but remain concerned about the potential of further macro impacts in the back half of the year.” He repeated a Neutral rating, while trimming his target to $160 from $165.
ADSK stock was recently down $12.21, or 8.1%, to $138.00.
Write to Eric J. Savitz at email@example.com