Wedbush Offers Autodesk As Short Idea

• Autodesk, Inc. (NASDAQ: ADSK) shares have surged 42 percent in the last three months, even after hitting a low of $43.14 on October 1.
• Wedbush’s Steve Koenig maintained a Neutral rating on the company, with a price target of $55.
• Koenig believes that Autodesk’s stock valuation does not leave any scope for a slower pace of the company’s model transition.

Analyst Steve Koenig wrote, “For a trading short over the next few quarters, we would pick Autodesk, as valuation doesn’t leave any room for further disappointments regarding the pace of its model transition.”

Autodesk appears poised for improved cost control. Koenig added, however, that the recent uptick in Autodesk’s shares, in response to activist involvement, already reflects that the company’s margin expansion would accelerate and it would successfully execute its model transition.

The analyst further mentioned that Autodesk’s FY15 license upgrades have probably pulled forward significant near-term demand. Although Autodesk has recently softened its stance on growing its spending by 5-6 percent annually, management seems to be making efforts to “persuade activists that investments in the cloud are a strategic imperative.”

“We believe ADSK will ratchet down its spending trajectory to 1-2% growth in CY16/ FY17, per management commentary, but management commitment to continue this trajectory beyond FY17 isn’t yet apparent,” Koenig stated.