Autodesk shares test key support zone

Autodesk (ADSL.US) is a company founded in 1982 that is a leading developer of application software in engineering, architecture, construction and design, and is also active in the media and entertainment industries. Autodesk's software enables design and modelling for many market sectors. The company currently provides  services worldwide and has more than 4 million active, paid subscribers to its services in nearly 180 countries.

Autodesk reports full year 2021 sales of $4.36 billion to $4.375 billion, for the third quarter of 2021 sales increased 18% compared to the same period in 2020. Earnings forecasts in the range of $4.98 to $5.04 per share indicate the company has a good chance of beating Wall Street's forecast of $4.99 per share. Sales for the quarter were up 18% compared to fiscal Q3 2020. Relative to Autodesk management's earlier forecasts, however, we have seen a slowdown in the company's revenue growth since Q2 2021 due to supply chain issues, among other things, which is also reflected in a decline in the company's stock valuation.

Year-on-year, however, the company's revenue grew by 17%, surpassing $1.17bn, but investors are now seeing a slowdown from Q2 2021, when revenue billings grew by 29% year-on-year. Autodesk's management also spoke of slowing revenue growth when it lowered its free cash flow forecast for the full fiscal year 2021.

Investors have high expectations for free cash flow growth in the coming years, and the lowering of the forecast was probably the main reason why Autodesk's shares fell in valuation after the release of its third quarter 2021 results. The company is currently facing possibly temporary supply chain issues - as customers cannot receive physical goods and there is no reason to pay for software, so the number of orders is falling. 

However, the company's growth opportunities still look promising. Autodesk's biggest source of growth in Q3 2021 was its architecture, engineering and construction (AEC) division, whose revenue increased 22% year-on-year to over $511 million. The largest portion of AEC's revenue comes from its proprietary Revit platform - design software for architects that is compliant with BIM standards, which are increasingly being adopted by governments around the world. Revit has an interesting growth trajectory over the current decade due to its ease of use and acceptance by regulators.

Autodesk is also expanding its market share in the construction industry with its recently launched Autodesk Construction Cloud (ACC) service for building general contractors and other companies working on construction sites that hope to connect designs done in the Revit platform to the real world. Its main product is Autodesk Build, a project management platform that helps workers communicate, send documents and perform financial operations - all from within a digital application. With hundreds of thousands of construction entities worldwide and tens of millions of workers in this sector of the economy, there is a huge opportunity for Autodesk's long-term growth in this area.

Autodesk has also designed the Fusion 360 platform for mechanical, electrical and manufacturing engineering, which is growing rapidly across many industries. Fusion 360 now has 175,000 registered customers, an increase of 45.8% on the previous year. The platform is cloud-based and offers flexibility for industry extensions, making it much more user-friendly than older platforms designed directly for mechanical design. Autodesk's management reported that the number of monthly active Fusion 360 users has surpassed 1 million and is growing by 50% year-on-year, an impressive result. Some of these users are now not active customers due to supply chain issues, but the outlook for Fusion 360 looks great anyway.

The developing trend of the transformation of the internet to virtual reality called Metaverse adds speculative potential to the company. Autodesk could potentially, together with companies such as Matterport MTTR.US, co-create an alternate reality picture.

With the development of ACC, the Fusion 360 platform and the creation of other core products in modern market sectors, Autodesk is a company with the potential for double-digit growth in the long term.

Shares of Autodesk (ADSL.US) are currently struggling to stay above the area of support marked by previous lows (green zone). If the demand side fails to stop the sellers and the mentioned zone is broken down, it is possible to accelerate the fall to the area of the local maximum near $245 per share. On the other hand, if the buyers gain advantage over the market, the next key resistance level is the 23.6% Fibo retracement and the level close to USD 270 per share. Source: xStation 5