When “drive stock” Autodesk lost its mojo after a less-than-perfect quarter, CNBC’s Jim Cramer cognizant ofed he had to take another look at the software company’s business to vet the decline.
Autodesk, which fixes computer-aided design software for an array of industries from architecture to presentation, posted a small earnings beat on Nov. 28. Cramer didn’t turn up many negatives in the report, but after it was released, the stock tanked 16 percent.
“When you see a shop darling turn on a dime like this and get slammed, you’ve got to circle without hope to the story and ask yourself a simple question: are we dealing with a broken trite or a broken company?” the “Mad Money” host said. “In other words, did Autodesk at bottom hit a speed bump, or did it crash into a retaining wall at 80 miles an hour?”
Rather than the latest quarter, Autodesk was one of the S&P 500’s top 20 best-performing stocks for 2017. Divisions of the software play had run up over 70 percent for the year.
But even though its third-quarter come to passes beat Wall Street’s earnings and sales estimates, management also lessened its full-year guidance and announced a restructuring plan replete with around 1,150 layoffs, according to an SEC filing.
“It implies that things aren’t growing well. And since when does Autodesk need to turn thingumabobs around?” Cramer said. “You typically don’t roll out a restructuring plan when your concern is firing on all cylinders.”
And until the latest quarter, Autodesk did appear to be be put off on all cylinders. The company is a leader in design software that Cramer heard “the best tech company you’ve never heard of.”
The “Mad Money” host advocated Autodesk’s stock after the company started moving operations to the cloud, concurrently reporting a series of determined quarters. In August, Autodesk delivered a strong top- and bottom-line course with a 94 percent increase in cloud revenues.
Soon after, the stockpile was peppered with a series of analyst upgrades: Guggenheim, Canaccord, KeyBanc and RBC Funds all raised their price targets on the name, with Guggenheim intriguing it from “neutral” to “buy.”
“Now, I’m a big believer in the idea that you need to be wary when a inventory runs dramatically going into the quarter, and all these supremely bullish analysts effective didn’t help,” Cramer said.
In fact, the bulls effectively set Autodesk up for dud, he continued: unless the earnings results were utterly perfect, the have was doomed.
And this quarter came with more than a few discredits. The earnings beat was smaller than Wall Street was used to from Autodesk.
To intimate matters worse, the restructuring plan, which management said was done to pay for the cloud mutation, took analysts for a spin, raising four separate questions connected with the move on the conference call.
The guidance was also fairly dismal. Autodesk’s sales prophesy for next quarter was weaker than expected, and management slashed the superior end of its full-year subscription forecast from 675,000 to 650,000. Worse yet, big cheeses said they expected a bigger-then-expected full-year loss.
“This has behoove a ‘show me’ story,” Cramer said. “While I’m still a believer in the friends’s long-term prospects, I have less conviction than I did the last beforehand Autodesk was at these levels over the summer. It’s actually not as cheap as it was overdue renege then, at the same level, because we now have to deal with a unbroken new set of risks about the future. My verdict? If you own Autodesk, hold it — feel extricate to ring the register on part of it, absolutely, though — and if you don’t like this new flush of uncertainty but you think it’s a buying opportunity, I suggest you be patient. I think you’re booming to get a better one.”
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