Autodesk's Billings Rebound With Rule Of 45 A Possible Catalyst, Analyst Says After Q4

Piper Sandler analyst Clarke Jeffries maintained Autodesk Inc ADSK with an Overweight and raised the price target from $236 to $244.

"Overall, the demand environment in Q4 remained consistent with Q3 with the approaching transition from up-front to annual billings for multiyear contracts, and a large renewal cohort, providing a tailwind to billings and free cash flow," said Debbie Clifford, Autodesk CFO.

The analyst is a buyer of ADSK on any weakness following the company's 4Q23 results, as the business has seen significant volatility of late based on exposure to industries and markets that have struggled to recover from the pandemic fully.

Autodesk reported $1.32 billion in revenue in the quarter, representing 9% Y/Y growth, in line with Street estimates of $1.31 billion. 

While the company's 36.3% adjusted operating margin was relatively in line with the Street's 37.1%, EPS of $1.86 came in at $0.05 ahead of estimates.

After seeing a lower-than-expected mix of multiyear billings last quarter, Q4 rebounded with strong 'as-expected' multiyear billings renewals in the company's largest multiyear cohort, plus some early renewals.

Jeffries believed that with the FY24 FCF guide out in the open, they were through the final clearing event for the multiyear billings transition & the magnitude of FCF trough in the coming two years.

The compounding effects of the pandemic, macro, & FX have weighed on ADSK's growth, to below its FY20-FY23 target CAGR, and investors, as a result, have a skeptical view of durable growth rates looking beyond FY24. 

The next catalyst could be a discussion at the company's investor day as shedding more light on the 'Rule of 45' operating framework of 10-15% revenue growth & 30-35% FCF margin should be well-received.

Price Action: ADSK shares traded lower by 12% at $194.69 on the last check Friday.