Has Wall Street gone a bit overboard punishing Autodesk, Inc. (NASDAQ:ADSK)? The design software maker’s share price continues to fall Wednesday after announcing plans to reduce staffing levels in the near-term by 13% or approximately 1,150 positions and to consolidate certain leased facilities. The company noted that the planned restructuring will have some impact on the sales organization, as it continues to evolve towards a more direct model with ecommerce, customer success teams, and inside sales.
In addition, Autodesk reported fiscal third-quarter 2018 results that were slightly ahead of the street on revenue and EPS but fell short on billings and cash flow. Specifically, the company delivered total revenue of $515.3 million, above consensus estimates of $513.6 million, while non-GAAP EPS of ($0.12) was also above consensus of ($0.13). Operating cash flow came in at ($51.1 million), below consensus of $58.8 million, with free cash flow of ($64.0 million) also below consensus of $27.1 million.
Autodesk president and CEO Andrew Anagnost commented, “We are pleased with another solid quarter of execution and progress on our business model transition […] We’re experiencing healthy trends in several key transition metrics, including ARR and deferred revenue growth, as customers continue to embrace our new subscription offerings. As we enter the growth phase of our model transition, we need to re-balance investments to focus on our strategic priorities. This includes divesting from some areas and increasing our investment in others. We’re taking this restructuring action from a position of strength. This is not a cost reduction activity as we maintain our commitment to keep total non-GAAP spend flat this year and next.”
Autodesk CFO Scott Herren added, “Our third quarter results mark our return to revenue growth as we reached the one year mark of subscription-only sales […] We are excited to have reached a significant milestone where the base of subscription plan subscriptions has surpassed the base of maintenance plan subscriptions for the first time. We are also experiencing early success with the maintenance-to-subscription program, which is a winning combination for both our customers and Autodesk. Our solid third quarter results and stable macro operating environment keep us confident in our near-term and long-term goals.”
Shares of Autodesk are falling nearly 16% to $109.79 as of 10:42AM EST. ADSK has a 1-year high of $131.10 and a 1-year low of $68.06. The stock’s 50-day moving average is $123.21 and its 200-day moving average is $112.99.
On the ratings front, Autodesk stock has been the subject of a number of recent research reports. In a report released today, Evercore ISI analyst Kenneth Talanian maintained a Buy rating on ADSK, with a price target of $135, which implies an upside of 18% from current levels. Separately, J.P. Morgan’s Sterling Auty maintained a Buy rating on the stock and has a price target of $130.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Kenneth Talanian and Sterling Auty have a yearly average return of 8.4% and 18% respectively. Talanian has a success rate of 64% and is ranked #1291 out of 4735 analysts, while Auty has a success rate of 66% and is ranked #180.
Overall, the sentiment on the street is bullish on ADSK stock. Out of 11 analysts who cover the stock, 11 suggest a Buy rating . The 12-month average price target assigned to the stock is $138.18, which represents a potential upside of 21% from where the stock is currently trading.
Autodesk engages in the designing and developing multimedia software products. It includes Autodesk 360 cloud services, AutoCAD civil 3D and LT, 3Ds Max, Maya, and Revit.