Barclays analyst Saket Kalia maintains his Overweight rating on Autodesk, Inc. ADSK, saying the biggest takeaway from the quarterly print was the planned increase in maintenance prices by about 38 percent over the next three years.
Analyst Commentary
The analyst said the increases are not only higher, but earlier than his expectations, and would drive more conversions to the new model. The price increase for maintenance will be 5 percent from May 7, then another 10 percent in FY 2019 and another 20 percent in 2020.
“Customers would trade in their perpetual license and lock in a subscription fee for three years that would be 60 percent less than if they had bought a new subscription from scratch,” Kalia wrote in a note.
The analyst models about 30 percent of the 2 million subscribers to convert in FY 2018, 50 percent in 2019 and 15 percent in 2020.
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Meanwhile, the company reported better-than-expected fourth quarter results, but provided a mixed outlook for the first quarter and FY 2018:
- Autodesk reported fourth-quarter adjusted EPS $(0.28) versus $(0.34) estimated.
- Sales came in at $479 million versus the estimated $473.6 million.
- Autodesk sees first-quarter adjusted EPS $(0.27)–$(0.21) versus the estimated $(0.13).
- Sales are guided $460 million–$480 million versus the estimated $496 million.
- Autodesk sees fiscal-year 2018 adjusted EPS $(0.73)–$(0.56) versus $(0.56) estimate.
- Sales $2 billion–$2.05 billion versus estimated $2.03 billion.
Kalia said FY 2018 outlook was hurt by consumer products that were upfront revenues now being de-emphasized.
“Looking past that, we think the conversion will prompt investors to look at FY 2020E FCF of ~$1.4 billion, which underpins our $105 PT,” Kalia added.
At last check, shares of Autodesk were down 2.08 percent to $85.50.
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