Now Is Not The Time To Buy Autodesk Shares of Autodesk (NASDAQ: ADSK) imploded in the wake of the Q3 earnings report and might be heading lower. The company issued a good release and provided solid guidance but...

The Autodesk Growth Story Falls Apart

Shares of Autodesk (NASDAQ: ADSK) imploded in the wake of the Q3 earnings report and might be heading lower. The company issued a good release and provided solid guidance but there is a widening gap between reality and what the market has been expecting. The stock has been trading at well over 50X its 2021 consensus and near 40X the consensus for 2022 which is a valuation expecting more growth than what we're getting. While the results and guidance are positive, both are short of expectations and suggest that growth is slowing. With shares having just set a new low and still trading near them, we see more downside risk than not and are not willing to buy into the growth story right now.

Lackluster Results Send Autodesk Lower

Autodesk is not ailing or failing in any fundamental way but that really has no bearing on the stock price, at least not right now. With the market expecting one thing and reality another the stock price is in for some turbulence if not more downside and it could last until the next reporting cycle or longer.

Turning to the Q3 results, the company produced yet another quarter of strong growth but the results are without oomph when compared to consensus or past performance. The $1.13 billion in revenue is up 18.76% from last year and beat the consensus but only by 90 basis points. Beating consensus is good but the market was generally expecting an even better performance so it doesn't count for much. On a two-year basis, the revenue is up 34.2% but growth has slowed from the mid 20% range in 2019 to below 20% now.

Turning to the margin and earnings, margins are holding up but shrinking under the pressure of global supply chain disruptions and labor shortages in the U.S. The good news is that this is better than expected and resulted in consensus-beating results on the bottom line as well. The GAAP $0.61 beat by $0.07 while the $1.33 in adjusted earnings is up 28% from last year and beat by $0.07 as well.

Looking ahead, the guidance is equally tepid in that growth is expected to slow again. The company is expecting $1.185 to $1.20 billion which would be another sequential growth and company record but only up 15% from last year at the high end. Worse, it compares poorly to the $1.20 Marketbeat.com consensus estimate, and EPS is expected below consensus as well.

The Analysts Still Like Autodesk

The analysts still like Autodesk post-release but they are adjusting their valuations. There've been at least 13 major sell-side commentaries in the wake of the report and all are adjusting their price targets low or below consensus. Of the 13, 10 lowered their targets while 3 raised them. The catch is that those 3 were already well below the consensus estimate and are still below it now. The Marketbeat.com consensus is, however, about 33% above the current price action and up over the past 30 and 90-day periods.

The Technical Outlook: Autodesk Might Be At A Bottom

Shares of Autodesk might be at the bottom but it's too soon to start gambling money on the idea. Price action is trading above key support but at the very bottom of an extremely large movement that wiped out an entire year's worth of trading. It is possible the price action will hold support at this level and continue winding its way through the current range but it is not guaranteed. A move below $252.50 would be bearish and could easily lead the stock down another few multiples.