Autodesk is breaking out as subscriptions grow
Shares are starting to move above long-term resistance, a bullish sign for now.
By Neal Rau
Shares of Autodesk, Inc. (ADSK) have gained about 15% this year, compared with a 20% return for the S&P 500, and a 37% return for competitor Adobe Systems Incorporated (ADBE). Autodesk holds 85% of the market share with its AutoCAD software, which still maintains a much lower price point than competitors. However, 3-D printing is the future and Autodesk will have to innovate to keep up, so is the stock worth buying near the 52-week highs?
This summer graphic designers and printers received a shock when Adobe forced all users to move to its cloud system and a monthly subscription charge. No longer will users be able to buy a boxed version and avoid upgrade costs. If customers stop paying the monthly fee, they lose access to the programs.
The software industry is moving toward subscription payments for online and desktop software, as consumers and businesses seek access to a steady stream of new features instead of just one version of a software package. Autodesk has already been offering a subscription model for its AutoCAD software, which has been a more profitable model for the company. Only about 22% of AutoCAD customers are using the subscription model, but that group accounts for 50% of the company's revenues. Revenue for the quarter, which was reported last on Aug. 22, was down 1.2% on a year-over-year basis. Stock Traders Daily currently has a "neutral" rating on shares of ADSK, but the stock has just recently broken above long-term resistance so that can change.
The move to subscriptions is also a way to keep customers, who are less willing to pay for big up-front licenses with more expensive programs. Customers will now be able to pay as they go for all of the company's latest Design and Creation Suites, Autodesk 3ds Max, Autodesk Maya, and the new Autodesk Maya LT. This will be a more cost effective solution for designers, engineers and visual effects artists to get started with Autodesk software with virtually no up-front capital costs, and give them the ability to quickly ramp up projects using industry-leading Autodesk software. Customers who choose to purchase monthly, quarterly or annual plans will receive similar benefits to Autodesk Subscription customers including staying current with the latest product updates, access to select Autodesk 360 cloud services and basic support.
It is the latest in a series of moves by Autodesk to encourage customers to adopt regular maintenance programs, giving them the ability to upgrade to new versions over time, as the shift to 3-D printing looks to be a major growth driver in the future.
Companies like 3D Systems Corporation (DDD) and Stratasys, Ltd. (SSYS) are making headlines with innovations in 3-D printing. Autodesk has aggressively expanded into 3D printing software. Earlier this year, Autodesk released a new app for the Apple's (AAPL) iPad called 123D Catch, which enables users to capture 3D images of things using their tablet's camera. Users take photos with their iPad and submit them for processing on the Autodesk Cloud, which converts them into a realistic 3D model that you can view, share, and download.
As Autodesk continues to develop 3-D software for architecture, engineering, construction and entertainment markets worldwide, there will be big opportunities for growth. Based on the Stock Traders Daily real-time trading report, the stock has broken above long-term resistance, which is now converted support. So far, converted support is holding, and as long as that remains true, the rules that govern our strategies tell us to expect higher levels, but converted support also acts as our risk control. We are buyers at that converted support level, but caution buyers not to chase the stock. Although it seems to be able to push higher if converted support (former resistance) stays in place, that will change if the stock falls back into its longer term channel, so keep this one tight to the vest.
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Bill Stiritz has experienced an estimated $145 million in paper losses on his investment in the company.
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