Autodesk Raises Guidance After Clearing Audit Investigation

Key Points

• Autodesk is a leading computer-aided design (CAD) software provider servicing construction, engineering, and architecture clients.
• In April 2024, an internal Audit Committee investigation was made into potential manipulation of financial metrics for fiscal years 2022, 2023, and 2024, but it concluded with no restatements.
• Autodesk raised its EPS and revenue guidance for the fiscal full year 2025.

Autodesk Inc. NASDAQ: ADSK is a leading provider of 3D design, engineering, and entertainment technology solutions. It's widely known for its computer-aided design (CAD) programs used by engineering, design, architecture, and construction firms. The computer and technology sector company is highly reliant on the well-being of the construction market. The company has been migrating to the cloud and attempting to expand into Federal and State Transportation Department projects. Autodesk competes with Adobe Inc. NASDAQ: ADBE, Trimble Inc. NASDAQ: TRMB and Siemens AG OTCMKTS: SIEGY.

No Restatement of Financials Required After Autodesk’s Internal Audit

Autodesk had a cloud over its head stemming from an Audit Committee investigation that was initiated in April 2024 for the fiscal years 2022, 2023, and 2024. The Audit Committee reviewed the company’s practices in recording free cash flow (FCF) and non-GAAP operating margin. The concern was about the potential for manipulation to impact financial metrics to manage financial performance to meet performance targets.

The Audit Committee concluded its investigation in May and reported on June 3, 2024, that it found instances of multi-year upfront billing contracts with product and enterprise subscriptions. The company has historically relied on multi-year contracts to help meet cash flow targets. The Audit Committee concluded that no restatement of financials would be required. This sent shares surging higher by over 10% the following morning. The company also raised its forward guidance for fiscal Q1, Q2, and full-year 2025.

ADSK is Attempting to Recover from a Head and Shoulders Breakdown Pattern

The daily candlestick chart for ADSK illustrates a head and shoulders breakdown pattern. The breakdown through the neckline occurred on the $234.05 price break on April 15, 2024. It eventually fell to a swing low of $195.12 on May 31, 2024. The conclusion of the audit investigation, combined with raised guidance, enabled a surge back up to the $322 resistance level. Shares have pulled back as it attempts a gap fill at $227.57. The daily relative strength index (RSI) is stalled at the 50-band. Pullback support levels are at $208.34, $195.43, $186.36, and $178.42.

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Autodesk Delivers Upside Guidance for Fiscal Full-Year 2025

Autodesk issued upside guidance for fiscal full-year 2025 EPS of $1.87 versus $1.74 consensus analyst estimates. Revenues are expected to be $1.42 billion, surpassing the $1.39 billion consensus estimates. Fiscal 2025 Q2 EPS is expected between $1.98 to $2.04 versus $1.97 analyst estimates. Q2 2025 revenues are expected to be between $1.475 billion and $1.490 billion versus the consensus estimates of $1.47 billion.

Autodesk raised its full-year 2024 EPS guidance to $7.99 to $8.21, from previous estimates of $7.89 to $8.11, versus $8.05 consensus estimates. Fiscal full-year 2025 revenues are expected to be between $5.99 billion and $6.09 billion versus $6.04 billion consensus estimates.

Autodesk CEO Andrew Anagnost commented, “We appreciate your patience as we work through this important process.” He concluded, “We take situations like this very seriously and are grateful to put the investigation behind us."

Analysts Breathe a Sigh of Relief and Reiterate Ratings for Autodesk

Many analysts chimed in and reiterated their bullish stance. RCB Capital reaffirmed its Outperform rating with a $260 price target. RBC was relieved there was no restatement to any financials. However, the Audit Committee found higher-than-normal upfront billings in fiscal 2023 to meet FCF goals. Piper Sandler reiterated their Neutral rating and lowered its stock price target to $239 from $260.

Citi Research reiterated its Buy rating. The Citi analyst commented, "Overall, CITI views the news as positive as it provides much-needed clarity that the accounting investigation is wrapping up with a relatively benign outcome and that management took a more aggressive (but not nefarious) act in managing the business to FCF targets - something it believes was pretty obvious and already well understood by investors."

Autodesk analyst ratings and price targets are on MarketBeat.