Autodesk (NASDAQ:ADSK) is headed for a mixed first quarter earnings report this week, according to Deutsche Bank, which cut its rating on the design software firm’s shares.
The stock fell 5% on Monday. Analyst Bhavin Shah cut his rating to hold from buy and lowered his price target to $225 from $275. The stock was trading at $181.77 in the midday session.
Earnings are scheduled to be reported on Thursday. Shah noted that customers appear less willing to pay upfront for multiyear contracts given the current economic uncertainty. That could put downside pressure on forecasts.
On the first quarter, “the majority of our partner conversations noted a slight miss vs. plan, with broader inflation/interest rate concerns to blame, though others did mention performance remains fine with limited to no macro related impact yet,” the note said. “Commentary around ‘design’ continues to highlight market saturation constraining the ability to grow new business and all partners noted customer willingness to pay multiple years upfront is diminishing.”
Shah said his channel checks indicate fiscal 2023 could be weaker than expected because of this changing demand. There are also foreign exchange challenges and sanctions on Russia for its war on Ukraine affecting approximately 2% of revenue, Deutsche Bank said in a note.
The note also said fiscal year 2024 consensus expectations suggest a slight downside to billings and a downside to free cash flow forecasts as the Street isn’t factoring in the demand shifts.