On Tuesday, HSBC upgraded Autodesk (NASDAQ:ADSK) stock from Hold to Buy, setting a new price target of $299, up from the previous $242. The revision reflects a positive outlook on the company's earnings growth and valuation compared to the sector.
The analyst at HSBC highlighted Autodesk's current valuation, noting that its shares are trading at a forward non-GAAP P/E ratio of 30.6x for the calendar year 2024 estimates, which is below the sector median of 33.7x.
This discount is seen as unwarranted given the expected consistent growth in Autodesk's non-GAAP EPS, projected to rise at a compound annual growth rate (CAGR) of 12.2% from 2024 to 2027.
Autodesk's transition to a subscription model and system consolidation by customers are key factors contributing to a more predictable and robust earnings growth trajectory. As a result, HSBC has aligned its target P/E ratio for Autodesk to match the sector's non-GAAP median P/E of 33.7x, up from the previous target of 29.7x.
The new price target is based on 33.7 times the forecasted next-12-month non-GAAP EPS of $8.86, an increase from the earlier estimate of $8.19. This target suggests a potential upside of 15.8% from the stock's current price, prompting the firm to upgrade Autodesk to a Buy rating.
The upgrade signifies HSBC's expectation that Autodesk will maintain strong earnings growth over the coming years, which could potentially benefit investors seeking exposure to the stock.
In other recent news, Autodesk has seen significant financial growth with its second-quarter fiscal year 2025 results surpassing consensus estimates. The company reported a 2% rise in revenue, earnings per share of $2.15, and free cash flow of $203 million. Autodesk also raised its full-year 2025 revenue growth guidance to around 11% following the successful implementation of a direct customer billing transaction model in North America.
Several analyst firms, including Goldman Sachs (NYSE:GS), Oppenheimer, Stifel, Rosenblatt, BMO Capital Markets, and Mizuho, have revised their outlook on Autodesk. Goldman Sachs upgraded Autodesk's stock from Sell to Neutral, citing improved growth outlook. Meanwhile, Oppenheimer, Stifel, and Rosenblatt maintained their positive stance, raising their price targets.
The company is on track to achieve its fiscal year 2026 operating margin targets of 38-40% ahead of schedule in fiscal year 2025, according to Goldman Sachs. Autodesk's diversified portfolio and subscription model have demonstrated resilience, with the company seeing a 21% growth in direct revenue, which now represents 40% of total revenue. These are the recent developments for Autodesk.
InvestingPro Insights
Following HSBC's upgrade of Autodesk to a Buy rating, real-time data from InvestingPro offers additional insights into the company's financial health and market performance. Autodesk's market capitalization stands at a robust $55.69 billion, reflecting its significant presence in the industry. Despite a high price-to-earnings (P/E) ratio of 52.52, which indicates a premium valuation, analysts have revised their earnings upwards for the upcoming period, suggesting confidence in the company's profit potential.
InvestingPro data also shows that Autodesk's gross profit margin for the last twelve months as of Q2 2025 is an impressive 91.92%, underlining the company's ability to retain a substantial portion of its revenue as gross profit. Additionally, the company has experienced a solid revenue growth of 11.38% during the same period, indicating a healthy expansion of its business operations.
Autodesk's strong return over the last three months, with a 22.57% price total return, aligns with HSBC's positive outlook on the stock. It's worth noting that Autodesk operates with a moderate level of debt and does not pay a dividend to shareholders, which could be appealing to growth-oriented investors. For those seeking a more comprehensive analysis, InvestingPro offers additional tips on Autodesk's financial metrics and market performance at https://www.investing.com/pro/ADSK, with a total of 15 InvestingPro Tips available to help investors make informed decisions.
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