Autodesk Has Designs on New Business Model
The shift to subscription-based pricing should pay off in the long term.
By Andrew Lange | 02-28-14 | 06:00 AM | Email Article
After fully digesting Autodesk‘s (ADSK) fiscal 2014 results, we have taken a fresh look at the firm’s strategic business model transition and what it ultimately means for the company over the long term. While the company’s financial performance will be underwhelming (relatively speaking) in the short term given revenue recognition changes, we think Autodesk is well placed to benefit from its shift to more subscription-based, higher long-term value pricing models. We expect revenue growth to converge with 12% billings growth in fiscal 2018. Additionally, we forecast considerable operating margin expansion given the business model transition, with 30% non-GAAP operating margins in fiscal 2018, in line with guidance. In all, we have rolled our financial model forward one year, have become more confident in Autodesk’s ability to migrate clients to subscription-type pricing models, and see good spending across the company’s core markets. As a result, we have increased our fair value estimate to $51 per share from $38 and retain our Wide Economic Moat Rating. Read more of this post
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