On Tuesday, Goldman Sachs (NYSE:GS) adjusted its stance on Autodesk (NASDAQ:ADSK) stock, elevating the software company's stock from Sell to Neutral and increasing the price target to $295 from $225. The firm's analyst cited a shift in perspective due to Autodesk's recent performance and future prospects.
Autodesk's stock has lagged behind the broader market since the Sell rating was initiated on January 21, 2021, with a decline of 16% compared to a 29% increase in the NASDAQ. However, the analyst pointed to Autodesk's second-quarter fiscal year 2025 results, which surpassed consensus estimates.
The company reported a 2% rise in revenue, a 100 basis point improvement in operating margin to 37%, earnings per share of $2.15, and free cash flow of $203 million. Strong guidance for the third quarter and full fiscal year 2025, projecting 11% revenue growth, also contributed to the rating change.
The analyst noted that Autodesk is on track to achieve its fiscal year 2026 operating margin targets of 38-40% ahead of schedule in fiscal year 2025, excluding the impact of foreign exchange and the new transaction model. The completion of the free cash flow transition to annual billings by the end of fiscal year 2026 was also highlighted as a positive development.
The valuation of Autodesk appears more attractive when compared to its design industry peers, such as Altair Engineering and Bentley Systems, despite having a similar financial profile.
Autodesk trades at a discount with an estimated calendar year 2025 enterprise value to sales ratio of approximately 8x and an enterprise value to free cash flow ratio of around 28x, compared to peer averages of 11x and 45x, respectively.
Long-term factors that support a more positive outlook include minimal risk associated with the rollout of the transaction model, as evidenced by successful implementations in Australia and North America, and the potential for continued pricing power given Autodesk's essential role and value-oriented approach within its product suite.
In other recent news, Autodesk has reported substantial financial growth, with revenues increasing by 12% year-over-year to $1,505 million in the 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. This has led to Autodesk raising its full year 2025 revenue growth guidance to around 11%.
Several analyst firms, including Oppenheimer, Stifel, Rosenblatt, BMO Capital Markets, and Mizuho, have maintained a positive outlook on Autodesk, raising their price targets. However, Mizuho has maintained a Neutral rating, 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.
InvestingPro Insights
As Goldman Sachs revises its outlook on Autodesk, investors may consider the latest data and insights from InvestingPro to further understand the company's financial health and market position. Autodesk currently boasts a robust market capitalization of $55.69 billion, reflecting its significant presence in the software industry. The company operates with impressive gross profit margins, the latest being 91.92% for the last twelve months as of Q2 2025, indicating efficient cost management and a strong competitive edge. Despite trading at high valuation multiples, with a P/E ratio of 52.52 and a Price/Book ratio of 22.51, Autodesk's recent performance justifies investor confidence. The company has experienced an 11.38% revenue growth over the last twelve months, signaling healthy expansion.
Autodesk's strategic moves and operating efficiencies are paying off, as analysts have revised their earnings upwards for the upcoming period, showing optimism in the company's ability to sustain its growth trajectory. While the company does not pay dividends, it has demonstrated a strong return over the last three months, with a price total return of 22.57%. This aligns with the long-term factors mentioned in the article, suggesting that Autodesk's strategic initiatives and market positioning may continue to yield positive returns for investors.
For those interested in a deeper analysis, InvestingPro offers additional tips on Autodesk, providing a comprehensive view of the company's financial metrics and market performance. To explore these insights and make informed investment decisions, visit https://www.investing.com/pro/ADSK.
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