logo
  Join        Login             Stock Quote

Autodesk (NASDAQ:ADSK): Cautious call from Morgan Stanley

 August 15, 2007 10:36 AM
 


- Morgan Stanley is out with a cautious call on Autodesk (NASDAQ:ADSK) saying they are picking up softness in the channel overall that may weigh on ADSK results expected this Thursday. With a few positive checks to help keep things from looking too stormy, feedback indicating sales quotas a stretch and a few resellers frustrated with shrinking incentives, the firm believes that the building front may catch up with the company - if not this quarter, perhaps the second half of the year for which a healthy ramp (+15% Y/Y) is expected. The stock currently trades in-line with its peers using multiples from a conservative model, but any softness either in actual results or guidance could weigh on the shares especially given ADSK's record of better growth and expectations for the same.

Other vendors in the segment experienced slowness this quarter (see PMTC and Dassault's SolidWorks segment) and MSCO believes ADSK may also be seeing pressure based on channel feedback hence our focus on sales inertia.

Last Q's results indicated momentum in certain areas but full-year guidance left us wondering if it was on the optimistic side against the backdrop of some potentially weakening core metrics. ADSK has been able to leverage subscriptions and 3D to drive overall revenue growth but declining new seat adds, slowing subscription penetration and sluggish deferred revenue growth may point to signs of a storm ahead.

Notablecalls: I think this call is actionable from a trading perspective. Recall that PMTC reported solid Q1 results and provided strong guidance only to disappoint investors couple of months later. While admittedly PMTC's negative pre-announcement was due to weak execution, one can't help to wonder if it was the only reason. Maybe the CAD market is indeed slowing? Like ADSK, PMTC's top line growth had been decelerating over the last year.

Also, recents checks done by other firms show that some large Autodesk resellers have indicated that the loss of volume discounts on AutoCAD has hurt their business. Some mentioned that they tried to put more sales effort behind 3D products, but that the market for 3D is simply going to develop and grow at its own pace. In other words, changing incentive compensation and changed sales force behavior could not alter the pace of 3D adoption beyond its own chosen speed.

I know there's a fair chance ADSK will prove the doubters wrong but given the nervous shoot-first-ask-questions-later type of market we are in I think ADSK stock will take a hit today.
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageInitial Jobless Claims Rose Unexpectedly

Claims unexpectedly rose in the latest report through last weekend to breach 300,000 for the first time read on...

article imageAll Quiet on the Record High Front

What can we glean from the media’s lack of attention to the market’s recent record read on...

article imageThe Chip Maker Short Sellers Should Be Watching

Investing in semiconductor stocks is always tricky. Industry cycles can lead to bumps in the road for the read on...

article imageChicago Fed: US Economic Growth Slowed In October

The pace of US growth slowed more than expected in October, according to this morning’s update of the read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.