Ticker Reports for June 12^th

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Autodesk's Quarterly Results Could Drive It Back to Recent Highs

After reporting the year's first quarter results, Autodesk Inc. shares (NASDAQ: ADSK) are trading lower by over 3% to end the day. However, the company's financial results are far from those that would warrant such price action, and Wall Street analysts have noticed this fact.

Outside of the post-earnings reaction in the stock price, shares of Autodesk are trading at a compressed 76% of their 52-week high prices, opening the way for a potential discount play to be considered by investors today. With the world of technology stocks claiming the lion’s share of market attention, it seems inevitable that Autodesk may join the party soon enough.

While not as popular as other peers in the space, stocks like Nvidia Co. (NASDAQ: NVDA) and even Dell Technologies Inc. (NYSE: DELL), Autodesk still merits some of the excitement – and capital – that the rest of the artificial intelligence group is getting today. Here are some reasons behind Autodesk’s potential return to recent highs.

Autodesk's Financials Lay the Foundation for a Stock Rally

With an over 15% return on invested capital (ROIC) rate, Autodesk’s financials lay the foundation for what could become the easy choice in today’s stock-picking endeavors.

Within the company’s quarterly press release, investors will find that revenues increased over 12% in the past 12 months, which is far above the minimum requirements for a potentially good investment in today’s lackluster economy, as judged by the lower revised GDP growth rate of only 1.3% in the past quarter.

Apart from double-digit revenue growth, the company’s operating margin grew to 35%, or 3% higher than the previous year. Of course, keeping more money from each dollar in sales allows management to reinvest more capital efficiently and deliver these types of ROIC rates for investors to enjoy.

More importantly, there is an excellent reason why markets are willing to pay a price-to-book (P/B) ratio of 23.8x for Autodesk stock, which is 260% over the computer industry’s average 6.6x P/B valuation.

One of these reasons may be the subscription revenues, which grew by 11% to reach $1.3 billion. Because subscription revenue makes for more steady and predictable cash flows, markets could value it over other stocks that aren’t that stable in today’s market.

More than that, revenue retention rates at Autodesk remained at 100%, meaning that no customer dared to look elsewhere to replace the service and products received by the company. As these are all factors that Wall Street likes, it would be wise for investors to check what analysts are thinking about Autodesk stock.

Wall Street's Perspective on the Future of Autodesk Stock

According to the Royal Bank of Canada, the stock could go as high as $320 a share, a valuation that was set—and has not changed—since April 2024. To prove these analysts right, the stock would need to rally by as much as 51.3% from its current level.

To back these valuations into reality, Wall Street is now projecting up to 17.9% earnings per share (EPS) growth for the stock this year. Compared to peers like Adobe Inc. (NASDAQ: ADBE), a 12.8% EPS growth projection falls behind Autodesk, explaining why that stock’s P/B valuation is only 12.9x compared to Autodesk’s 23.8x.

With one last check, investors can take so-called ‘smart money’ as an indicator of future interest. The Vanguard Group, Autodesk’s largest shareholder, decided to boost its stake in the stock by up to 1.9% in the past quarter, bringing its net investment to $5 billion.

Considering that the computer software industry now trades at an average of 88.7% of its 52-week high, and Autodesk at only 76%, it comes as a surprise for investors to see Autodesk outperform the Financial Select SPDR Fund (NYSEARCA: XLF) by over 22% in the past 12 months.

With over $1.1 billion in billings, Autodesk is poised to continue delivering impressive financials in the future, another reason the market is bidding the stock higher and why it is willing to pay such a rich premium over its peers.

Autodesk's Upside Potential Linked to Rising Home Listings

As a final catalyst for investors to consider, rising U.S. home listings and heating activity in the real estate sector may increase demand for Autodesk’s 3D rendering capabilities.

Utilizing artificial intelligence to aid builders and architects in their need to design new construction, whether it is commercial or residential.

Backed by solid quarterly financial results, high valuation cases from analysts, and EPS growth, it looks like the Vanguard Group may have made the right choice in boosting its Autodesk positions.

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A Bubble is Brewing in Oracle Stock, and it's Only Getting Bigger

An AI-driven bubble is forming in Oracle’s (NYSE: ORCL) shares, which is only getting bigger. The FQ4 release highlights a supply-demand situation in which demand outpaces supply, and Oracle invests to meet the need. Demand and budding partnerships with major cloud providers such as Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOG) are elevating this company into the pantheon of AI powerhouses, the few companies able to capitalize and monetize AI. Fiscal 2024 was a game-changing year, and 2025 will only be better.

Guidance from CEO Safra Catz is an expectation for revenue growth to accelerate sequentially throughout the year and result in double-digit annual growth. A robust increase in RPO supports guidance. The remaining performance obligation increased by 44% and suggests the business acceleration in 2025 will also be robust.

Oracle Rises on Weak Results

Oracle’s Q4 results were weaker than expected, but two mitigating factors are at play. The first is that analysts set a high bar, so the 200 basis points of top-line underperformance aren’t as bad as they look. The second is the outlook. The company inked major deals with Google and Microsoft to link their clouds. Now, MSFT Azure and Google Cloud users will have access to Oracle’s many products and services to turbocharge (in their words) cloud revenue growth. Among those users is OpenAI, which also signed a contract to use Oracle's cloud to train its ChatGPT LLM.

Oracle’s $14.29 billion in revenue is up 3.3% compared to last year, driven entirely by cloud services and support, which grew by 9%. Cloud License and On-Premise License fell by 14%. Within Cloud Services and Support, the total cloud grew by 20% on a 42% increase in IaaS and a 10% gain in SaaS. Fusion Cloud ERP grew by 14%, and Netsuite Cloud ERP by 19%.

The margin news is mixed but ultimately favorable to investors. The operating margin improved but was offset by increased tax provisions that resulted in a 5% decline in net income. The takeaway is that $1.63 in adjusted earnings is down slightly from last year and missed the consensus but is sufficient to sustain the dividend outlook, balance sheet health, and business reinvestment.

Investors Expect Robust Dividend Growth From Oracle

Oracle is a solid dividend-paying stock with a yield aligned with the broad market average. The difference is that Oracle has been increasing the payout at an above-average pace for years and is expected to continue because the payout ratio is very low at 28%, and earnings are expected to grow. The analysts' consensus for F2025 was strong at 13% before the Q4 report was released, and estimates are now rising, so the company should easily sustain its 15% distribution CAGR.

Balance sheet highlights support the outlook for robust dividend growth. The Q4 highlights include increased cash, receivables and assets compounded by debt reduction. The net result is a 6X increase in shareholder equity and improved corporate leverage.

Analysts Raise Targets for Oracle and Forecast 15% to 30% Upside

Analysts are raising their targets for Oracle stock following the Q4 release, leading it to a new high. MarketBeat.com tracks over a dozen revisions, all upward, and most are above the consensus forecast. The consensus forecast assumes about a 10% upside, while the range of new targets implies a 15% to 30% upside and has lifted the ceiling. Guggenheim set a new high target of $175, which will likely be exceeded over time. Trading at only 20X this year’s and 18X next year’s earnings estimates, it is a value compared to leading blue-chip AI/cloud players.

The technical action is promising. The market is up nearly 8% in premarket trading, setting a new high. If the market follows through on this signal, it should continue to advance. Because the stochastic and MACD indicators show a strong buy signal, the move could gain momentum over the next few days to several weeks, resulting in a melt-up for this stock.

Oracle stock Chart

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Danaos Benefits from Increasing Demand in Container Shipping

Danaos Corp. (NYSE: DAC) is a leader in the global container shipping industry. The company specializes in operating dry bulk and container vessels. Danaos owns and operates its fleet of container vessels but also maintains a smaller fleet of dry bulk vessels to transport bulk commodities like coal, iron ore, and grain. The dry bulk division has Capesize vessels, which are enormous ships that are too large to pass through the Panama Canal, so they need to go around the Cape of Good Hope and Cape Horn, thus the name Capesize.

Danaos is diligent about maintaining a modern fleet of fuel-efficient ships, which helps reduce operating costs as well as impact the environment. The company is a major benefactor of skyrocketing freight rates as a result of the Red Sea conflict. The Shanghai Container Freight Index recently surged even higher to 3,3184.87, rising from 993 in November of 2023.

Danaos operates in the transportation sector and competes with other container and dry bulk shippers, including Zim Integrated Shipping Service Ltd. (NYSE: ZIM), Genco Shipping & Trading Ltd (NYSE: GNK), and Star Bulks Carriers Co. (NASDAQ: SBLK).

Danaos: A Hidden Value in Plain Sight

Danaos has impressive fundamentals when it comes to valuations. Shares trade at just 3.23x forward earnings compared to 10.39x for Zim, 9.29x for Genco, and 6.88x for Star Bulk Carriers. The company is profitable, with a price-to-sales ratio of 1.88. The price to book is 0.84 as it generates $34.04 cash per share. The float is rather tiny at just 11.45 million shares, giving it a market capitalization of just $1.83 billion.

Danaos DAC stock chart

DAC Forms a Daily Pennant Pattern

The daily candlestick chart on DAC depicts a pennant pattern. The flagpole formed on the parabolic run-up from $71.32 on April 16, 2024, to peak at $98.25 on June 3, 2024. The pennant formed following the flagpole top comprised of converging trendlines. The pennant pattern is usually a continuation pattern. However, it may be starting to break down. The daily relative strength index (RSI) peaked at the overbought 92-band and has been slipping to the 65-band. The RSI has formed a divergence top. Pullback support levels are at $88.00, $82.65, $76.44, and $6953.

Danaos Reports Mixed Results for Q1 2024

Danaos reported Q1 2024 adjusted EPS of $7.15, which missed consensus estimates of $7.74 by 59 cents. Operating revenue rose 4.1% YoY to $253.45 million, bearing a $248 million single analyst estimate. Danaos generates revenues from the container vessel and dry bulk vessel segments. The company bought back 1,671,059 shares of common stock for $104.4 million.

Danaos Plans to Expand Its Capacity

In February 2024, Danaos entered agreements to acquire three more Capesize dry bulk vessels aggregating 529,704 dead weight tonnage (DWT). The ships are expected to be delivered in Q2 and Q3 2024. This will bring the total Capesize fleet to 10 vessels with a total capacity of 1,760,861 DWT.

In February and March 2024, Danaos added four additional 8,258 twenty-foot equivalent unit (TEU) newbuildings to the order book, which are expected to be delivered in 2026 and 2027. A TEU refers to a 20-foot-long container. As of March 2024, the company had 14 container vessels under construction with a total capacity of 107,936 TEU.

Danaos Newbuildings: Delivery Schedule and Plans for Sustainability

Newbuildings are vessels under construction. In April and May 2024, Danaos received two newbuildings. Four more are expected in 2024, two in 2025, three in 2026, and three in 2027.

All the newbuildings are outfitted with the latest eco characteristics. These ships are methane fuel ready, with alternative maritime power units, and built in accordance with the International Maritime Organization's more current requirements regarding Tier III emission standards and the Energy Efficient Design Index (EEDI) Phase III.

Optimistic Comments from Danaos CEO

Danaos CEO John Coustas noted that the container shipping market strengthened in Q1 2024, and the trend continues into Q2. Charter and box rates continue to accelerate. This renewed optimism in the market extends to charterers' long-term view as they make charter commitments for newbuildings scheduled for delivery in 2025 to 2027.

Coustas added, “More importantly, we have now secured multi-year chartering agreements for all our vessels on order, while we have also extended charters of certain existing vessels. As a result of this chartering activity, over the past three months, we have added $423 million to our contracted revenue backlog that today stands at $2.5 billion with an average charter duration of 2.9 years.”