Autodesk Stock Could Be a Downgrade Risk

Not a single analyst rates ADSK a "sell"

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Software stock Autodesk, Inc. (NASDAQ:ADSK) is up 1.7% to trade at $313.67 at last check, putting some distance between its year-to-date breakeven level. Despite the lackluster price action in 2021, 12 of 13 analysts recommend a "buy" rating, with zero "sells" on the books. So are analysts on to something, or is ADSK a risk for downgrades going forward?

Autodesk stock is up 27% year-over-year, but remains a ways off its Aug. 21 record high of $344.39. On the charts, keep an eye on ADSK's $270 level, which coincides with its 320-day moving average and served as support earlier in October.

From a fundamental point of view, Autodesk stock undoubtedly has a rich valuation. Autodesk stock trades at an inflated price-earnings ratio of 52.11 and a very high price-sales ratio of 17.47. However, that often tends to be the case for growth stocks, which Autodesk continues to be classified as due to its seemingly endless opportunities as a software company.

Unfortunately, ADSK's growth rate has begun to slow, rendering Autodesk stock vulnerable to a correction in the short-term. Although Autodesk has maintained consistent growth in recent years, ADSK's trailing 12-month revenues and net income have only increased 6.6% and 8.8%, respectively, since fiscal 2020. This makes Autodesk stock's valuation very forward-looking. Overall, Autodesk stock has already priced in multiple years of growth, limiting investor’s reward potential over the next 2-3 years.

For those wanting to get in on ADSK's next move, options look like the way to go. The equity's Schaeffer's Volatility Index (SVI) of 27% sits higher than 18% of readings from the past 12 months. This means options traders are pricing in low volatility expectations right now. What's more, the security's Schaeffer's Volatility Scorecard (SVS) ranks at 75 out of a potential 100, meaning Autodesk stock tends to outperform these volatility expectations, which is a boon for potential buyers. 

 

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