ADSK - Autodesk rises as BMO starts coverage but sees 'balanced' near-term setup

2023-05-24 07:58:54 ET

Autodesk ( NASDAQ: ADSK ) shares rose fractionally in pre-market trading on Wednesday as investment firm BMO Capital Markets initiated coverage on the design software company with a market perform rating.

Analyst Daniel Jester, who also slapped a per-share price target of $224 on Autodesk ( ADSK ), noted that the near-term outlook for the stock is "balanced" amid global economic concerns and the company's ongoing transition.

"Macro concerns regarding several of the company’s key end markets and lingering uncertainty on the mid-term [free cash flow] ramp as the company works through a billings transition offsets our appreciation for the strength of ADSK’s CAD and BIM businesses," Jester wrote in an investor note.

Jester added that the company is now "more insulated" from volatility than it was in the past thanks to a previous transformation, but it has not removed cyclicality from its business.

"We are near-term cautious on the underlying demand environment, reflecting macro indicators and our diligence checks, which confirmed a continuation of some of the headwinds the company discussed into this year including shorter duration contracts and some moderation in the pace of new subscription growth," Jester explained.

Despite the near-term uncertainty, Jester said there are a few areas of upside for Autodesk ( ADSK ), including the potential it gains share in the manufacturing industry with Fusion 360, as well as getting larger in construction via the design and project management stages via better sales execution.

Autodesk ( ADSK ) is slated to report quarterly results tomorrow after the close of trading.

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