Will designs on growth lift Autodesk’s share price?

Design software group Autodesk [ADSK] is set to report a 17.6% hike in year-over-year revenues when it reports its third-quarter earnings on 23 November.

Analysts expect the group to report revenues of around $1.12bn and earnings per share of $1.25, up 20.2% on the same period last year.

The group has been boosted by the increased popularity of its design and build digital software solutions, such as CAD and BIM tools for the architecture and construction industry and 3D design for films and cartoons. More robust demand for automation and artificial intelligence (AI) in the workplace is also helping Autodesk's share price.

Over the last 12 months, the Autodesk share price has climbed 26.5%, but it has experienced volatility. Its highest point this year was $342.27 in late August before it slumped to $272.93 at the start of October.

Autodesk shares price fell after its second-quarter earnings, despite revenues of $1.06bn meeting analyst forecasts and earnings per share of $1.21 beating them.

The main drag on investor sentiment was its third-quarter guidance, of revenue between $1.11bn and $1.13bn, but earnings per share of between $1.22 and $1.28, short of the $1.30 analyst expectations.

Billings blow

Investors were also concerned by an investor's day presentation in September, where Autodesk's management said its free cash flow would fall in 2024 because of a change to its customer billing strategy. The company is switching to receiving annual payments with smaller discounts and moving away from offering discounts for upfront payment for multi-year deals.

However, as Lee Samaha of The Motley Foolargues, investors have recently refocused on the long-term prospects of Autodesk's business.

"There is little debate over whether Autodesk is a long-term growth stock," Samaha wrote, showing confidence in the company's innovative range of products and more businesses and organisations turning to digital, both pre- and post-pandemic.

"We view this [the recent share price drop] as a transient issue and believe Autodesk's attractive long-term growth profile remains in place," said investment group Polen Capital in its Q3 investor letter.

Media growth

One exciting growth area is media and entertainment, which are vital in keeping people happy during the coronavirus-related lockdown. Movie studios and streaming giants are looking for the 'edge' as competition intensifies.

Autodesk also sees the potential and intends to build its range of products and services for this sector. Earlier this month, it bought LoUPE, a cloud-based production pipeline technology for artists and studios.

"We share a common passion — the desire to build software that empowers animators and studios to create the best stories and entertainment Removing friction from production allows more time for creative ideation and iteration that lets them produce more content faster," Autodesk said. "Cloud-based workflows make it easier for artists, producers, and supervisors to work more efficiently and scale with the pace of production."

Analysts are certainly cheering from the rafters about Autodesk stock. According to Market Screener, a consensus of 22 analysts have an outperform rating and a target price of $352.76, which is up from its current price of $322.52 as of the close on 19 November.

Triggers for Autodesk's share price

Analysts will be looking closely at subscriber numbers as more employees return to the workplace and subsequent demand for digital solutions such as 3D printing. US president Joe Biden's new infrastructure bill could also lead to more demand from architects, engineers and builders for quicker and more efficient solutions.

Questions will also be asked about the recent LoUPE acquisition and whether there may be more in the pipeline.

Finally, expect some commentary on Autodesk's new five-year plan, unveiled in October, to put all of its software products into a single set of technologies and make its offering more integrated.

This, it hopes, will make it easier for customers such as architects and engineers using different software products to share data and improve performance.