ADSK – Market expectations are for record-high Uniform ROA, but management may have concerns about free cash flow, subscriptions, and Construction Cloud
February 18, 2021
- Autodesk, Inc. (ADSK:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 56.6x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about free cash flow guidance, their new subscription model, and Construction Cloud’s capabilities
- Specifically, management may lack confidence in their ability to sustain multiyear customer payment growth and meet their 2023 free cash flow and Q4 operating margin guidance. Moreover, they may be exaggerating their Construction Cloud platform’s capabilities and the technology benefits of the Spacemaker acquisition. Additionally, management may lack confidence in their ability to provide value to customers in a similar way to other SaaS providers and convert more maintenance plan customers to subscriptions. They may also have concerns about the pace of their customer end-markets’ recovery and changes in their sales mix. Finally, management may be exaggerating their ability to leverage Fusion 360 for further adoption of the platform and win contracts without meeting customers face-to-face