Autodesk Earnings: Resilient Product Despite Headwinds to Open the Year; Shares Undervalued

Wide-moat Autodesk reported fiscal 2024 first-quarter results that were largely in line with our expectations. Continued foreign exchange headwinds coupled with contract renewal timing suppressed revenue slightly, and management expects revenue to accelerate as the year progresses. Business momentum was similar to the fourth quarter, with slight deceleration in new subscriber growth and current remaining performance obligation growth the same as last quarter coming in at 12%. However, Autodesk saw improved renewal rates. As noted in the fourth quarter, Autodesk’s transition from upfront to annual billings for multiyear contracts will affect billings growth for fiscal 2024. Despite the transition and currency headwinds, we have further confidence in Autodesk’s long-term noncore potential—from building information modelling to targeting infrequent users via its new Flex offering. As a result, we are modestly increasing our fair value estimate to $240 per share from $230 per share. We view shares as attractive, marking a rare opportunity for long-term-oriented investors to buy this best-of-breed name.