$ADSK was THE software to learn when I was growing up. My dad showed off CAD to me 20 years ago when his employer was building a textile factory back in India.
The learning curve and high switching costs, combined with $ADSK's iteration on old products and introduction new products to students for free produces a wide moat and strong momentum in the user base.
Informative podcast :
*
Informative podcast :
*
In the short term, their move into subscription/cloud model, might provide much more predictable revenues.
Looking at growth numbers :
* Revenue grew from $2.2B to $3.8B at 5.6%
* Gross profits from $2B to $3.4B at 5.5%
* Free cash flows from $510M to $1.3B at 10%
Looking at growth numbers :
* Revenue grew from $2.2B to $3.8B at 5.6%
* Gross profits from $2B to $3.4B at 5.5%
* Free cash flows from $510M to $1.3B at 10%
COGS has basically remained flat ranging between 250M to 330M!!
Prices :
* $261 per share.
* $57B in market cap.
* $57B in enterprise value.
Prices :
* $261 per share.
* $57B in market cap.
* $57B in enterprise value.
Establishing market position should be their number one focus. IMO, just like $ANSS, $ADSK should be valued on gross profit multiples than free cash flow multiples.
I like to buy pure play software companies at 10x gross profit multiples. But $ADSK trades at a premium : 16x.
I like to buy pure play software companies at 10x gross profit multiples. But $ADSK trades at a premium : 16x.
The past 5 years, they have been growing at an accelerated pace of 12% because of growth in adjacent markets and also subscription/cloud revenue model.
They don't look very keen on using free cash flows to buy back shares. The hope is they deploy it to acquire wisely.
They don't look very keen on using free cash flows to buy back shares. The hope is they deploy it to acquire wisely.
Base case 1:
Let's assume the same 5 yr growth into the future.
By 2026 :
They would generate $6B in gross profits.
Assuming 13x multiple, we get $78B in enterprise value.
That's 7% IRR.
Let's assume the same 5 yr growth into the future.
By 2026 :
They would generate $6B in gross profits.
Assuming 13x multiple, we get $78B in enterprise value.
That's 7% IRR.
Base case 2:
If we have to value $ADSK on free cash flows, their guidance is $2.4B for 2023. Slapping 25x multiple on that would get us to $60B in enterprise value. We are not losing money here.
Source :
* investors.autodesk.com/events/event-d…
If we have to value $ADSK on free cash flows, their guidance is $2.4B for 2023. Slapping 25x multiple on that would get us to $60B in enterprise value. We are not losing money here.
Source :
* investors.autodesk.com/events/event-d…
* Management promises 16% revenue growth until 2023. Last 3 years, they delivered on their revenue guidances, there's no reason to believe they won't do the same again.
* They can comfortably model out revenues, since their transition to subscription model is complete.
* They can comfortably model out revenues, since their transition to subscription model is complete.
All the promised revenue growth may come from :
* Monetizing freeloaders.
* Digitization of AEC (Architecture, Engineering & Construction).
* Acquiring new customers in Manufacturing and Media/Entertainment.
Northstar : To be one stop shop for manufacturing and construction.
* Monetizing freeloaders.
* Digitization of AEC (Architecture, Engineering & Construction).
* Acquiring new customers in Manufacturing and Media/Entertainment.
Northstar : To be one stop shop for manufacturing and construction.
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