Ticker Reports for June 10th
Autodesk Raises Guidance After Clearing Audit Investigation
Autodesk Inc. (NASDAQ: ADSK) is a leading provider of 3D design, engineering, and entertainment technology solutions. It's widely known for its computer-aided design (CAD) programs used by engineering, design, architecture, and construction firms. The computer and technology sector company is highly reliant on the well-being of the construction market. The company has been migrating to the cloud and attempting to expand into Federal and State Transportation Department projects. Autodesk competes with Adobe Inc. (NASDAQ: ADBE), Trimble Inc. (NASDAQ: TRMB) and Siemens AG (OTCMKTS: SIEGY).
No Restatement of Financials Required After Autodesk’s Internal Audit
Autodesk had a cloud over its head stemming from an Audit Committee investigation that was initiated in April 2024 for the fiscal years 2022, 2023, and 2024. The Audit Committee reviewed the company’s practices in recording free cash flow (FCF) and non-GAAP operating margin. The concern was about the potential for manipulation to impact financial metrics to manage financial performance to meet performance targets.
The Audit Committee concluded its investigation in May and reported on June 3, 2024, that it found instances of multi-year upfront billing contracts with product and enterprise subscriptions. The company has historically relied on multi-year contracts to help meet cash flow targets. The Audit Committee concluded that no restatement of financials would be required. This sent shares surging higher by over 10% the following morning. The company also raised its forward guidance for fiscal Q1, Q2, and full-year 2025.
ADSK is Attempting to Recover from a Head and Shoulders Breakdown Pattern
The daily candlestick chart for ADSK illustrates a head and shoulders breakdown pattern. The breakdown through the neckline occurred on the $234.05 price break on April 15, 2024. It eventually fell to a swing low of $195.12 on May 31, 2024. The conclusion of the audit investigation, combined with raised guidance, enabled a surge back up to the $322 resistance level. Shares have pulled back as it attempts a gap fill at $227.57. The daily relative strength index (RSI) is stalled at the 50-band. Pullback support levels are at $208.34, $195.43, $186.36, and $178.42.
Autodesk Delivers Upside Guidance for Fiscal Full-Year 2025
Autodesk issued upside guidance for fiscal full-year 2025 EPS of $1.87 versus $1.74 consensus analyst estimates. Revenues are expected to be $1.42 billion, surpassing the $1.39 billion consensus estimates. Fiscal 2025 Q2 EPS is expected between $1.98 to $2.04 versus $1.97 analyst estimates. Q2 2025 revenues are expected to be between $1.475 billion and $1.490 billion versus the consensus estimates of $1.47 billion.
Autodesk raised its full-year 2024 EPS guidance to $7.99 to $8.21, from previous estimates of $7.89 to $8.11, versus $8.05 consensus estimates. Fiscal full-year 2025 revenues are expected to be between $5.99 billion and $6.09 billion versus $6.04 billion consensus estimates.
Autodesk CEO Andrew Anagnost commented, “We appreciate your patience as we work through this important process.” He concluded, “We take situations like this very seriously and are grateful to put the investigation behind us."
Analysts Breathe a Sigh of Relief and Reiterate Ratings for Autodesk
Many analysts chimed in and reiterated their bullish stance. RCB Capital reaffirmed its Outperform rating with a $260 price target. RBC was relieved there was no restatement to any financials. However, the Audit Committee found higher-than-normal upfront billings in fiscal 2023 to meet FCF goals. Piper Sandler reiterated their Neutral rating and lowered its stock price target to $239 from $260.
Citi Research reiterated its Buy rating. The Citi analyst commented, "Overall, CITI views the news as positive as it provides much-needed clarity that the accounting investigation is wrapping up with a relatively benign outcome and that management took a more aggressive (but not nefarious) act in managing the business to FCF targets - something it believes was pretty obvious and already well understood by investors."
Autodesk analyst ratings and price targets are on MarketBeat.
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Lyft Stock Gap and Craps on Bold 2027 Guidance at Investor Day
Rideshare operator Lyft Inc. (NASDAQ: LYFT) made bold 2027 growth projections for its Investor Day, which caused shares to gap up to $17.29 initially but failed to sustain the move. The number two rideshare provider in the country is trying to close the gap with its number one competitor, Uber Technologies Inc. (NYSE: UBER). Both computer and technology sector companies have turned profitable on an adjusted basis. The duopoly dominates the rideshare industry, with UBER holding a 76% market share in the United States.
Lyft Looks to the Future
On June 6, 2024, Lyft provided financial targets for 2027 while reaffirming its 2024 guidance for its Investor Day. The company expects gross bookings to have a compound annual growth rate (CAGR) of 15% from 2024 to the full year 2027. Adjusted EBITDA margin, measured as a percentage of gross bookings, is expected to be around 4% in 2027. Free cash flow conversion, measured as a percentage of adjusted EBITDA, is expected to be higher than 90% annually between 2025 and 2027.
LYFT is Having Trouble Breaking Out of the Daily Descending Triangle
The daily candlestick chart on LYFT shows a descending triangle pattern. The descending trendline formed at the $20.82 peak and has capped each bounce attempt at lower highs connecting to the flat-bottom lower trendline at $15.27. The Investor Day financial update with 2027 targets helped to gap the shares, but they soon crapped back down into the triangle range again. The daily relative strength index (RSI) is stalled at the 42-band. Pullback support levels are at $14.90, $13.37, $12.21, and $11.36.
Lyft Reports a Solid Q1 2024 Earnings Report
On May 7, 2024, Lyft reported a Q1 2024 EPS of 15 cents versus 6 cents consensus estimates, beating by 9 cents. Net loss was $31.5 million compared to $187.6 million in the year-ago period. Net loss included $78.5 million in stock-based compensation and payroll tax expense. Gross bookings rose 21% YoY, ahead of its guidance of $3.5 billion to $3.6 billion. Adjusted EBITDA was $59.4 million, compared with $22.7 million in the year-ago period and above its $50 million to $55 million previous guidance. Lyft provided 188 million rides in the quarter, up 23% YoY. Active riders rose 12% YoY to 12.9 million, indicating improvement in rider retention.
Lyft Drivers Receive at Least 70% of Rider Fares
Lyft assured drivers they would receive at least 70% of the rider fare each week after external fees. The program launched in February and is having positive impacts. Nearly 75% of its drivers confirmed they now have a better understanding of their earnings.
Lyft's Women+ Connect Ride Feature
Lyft's Women+ Connect ride rollout received extremely positive feedback. This program enables female passengers to request female drivers. Women and non-binary activations increased 24% YoY. This continues to be one of the company's most successful initiatives.
Lyft's Positive Cash Flow Forecast for 2024
Lyft provided guidance for Q2 gross bookings of $4 billion to $4.1 billion. Adjusted EBITDA is expected to be between $95 million and $100 million, and an adjusted EBITDA of approximately 2.4%. Full-year 2024 ride growth is expected in the mid-teens, with gross bookings slightly higher than rides YoY growth. Full-year adjusted margins are expected to be around 2.1%. The company is on track to generate positive cash flow for the entire year. They expected 70% of adjusted EBITDA to convert to free cash flow for the full year 2024.
Lyft’s Advertising Business is Growing
Lyft Media revenues grew 250% YoY, with 50% of its business coming from repeat customers like Comcast Co. (NASDAQ: CMCSA) NBCUniversal. New customers added in the quarter include Zillow Group Inc. (NASDAQ: ZG) and Mastercard Inc. (NYSE: MA).
Lyft CEO David Risher commented, “According to our third-party brand measurement firm, Lyft Media ad campaigns have 7 times the impact relative to the norm, on-brand perception, and purchase intent.
Our video ads, which were new this quarter, also generated more than 10 times the ad industry's typical click-through rate. And in Q1, we added new partners, including Nielsen and Oracle Advertising, for their ad measurement and data enrichment solution for targeting, helping us deliver even more value for our customers.”
Lyft Gets 4 Upgrades After Investor Day
On June 7, 2024, Lyft received upgrades from four different analysts. Bank of America Securities, Gordon Haskett, and Loop Capital all upgraded their ratings to a Buy, with a price target of $20. Fox Advisors upgraded shares to Overweight from Equal Weight.
Lyft analyst ratings and price targets are on MarketBeat.
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How HP Stock Could Bring Double-Digit Upside for Buffett
Shares of HP Inc. (NYSE: HPQ) have recently broken out of their previous $27 to $30 a share channel; of course, this price action had been relatively justified. The company's recent quarterly financial results show how the comeback in the personal computer (PC) space could mean good news for the company's future, which is also good news for Warren Buffett.
After announcing a significant stake in HP stock back in 2021, some investors had a hard time understanding what the oracle of Omaha saw in the ‘dying’ computer company. Some bear cases have gained traction for the company, as printers and office equipment represent a large segment of HP’s revenue. Everyone can agree that with changing hybrid work settings, printers and office equipment could very well be a contracting industry.
However, HP's financials show a resilient position that could help management quickly pivot into what already makes the company money and even start to venture into other newer growth areas to boost shareholders' returns. This plan would be welcome news for activist investors like Buffett.
Reviving Shareholder Interest: HP's Printing Business as the Key Strategy
With over $460 million in free cash flow (operating cash flow minus capital expenditures) in the past quarterly financials, HP management could try to invest in the bullish outlook for the personal computer industry, especially with technology peers like Intel Co. (NASDAQ: INTC) and Nvidia Co. (NASDAQ: NVDA) breaking through current semiconductor ceilings.
Personal systems, including PCs, grew revenues by as much as 3% over the past year. However, net printing segment revenues declined by 8% during this time, led by heavier 12% contractions in HP’s commercial printing business.
Because this business generated up to $8.7 billion in revenue, it would be beneficial for investors to wonder how much the disposal of this segment would mean as a potential payout. However, to value this business, investors need to find a comparable printing business to start developing a rough idea.
This is where Xerox Holdings Co. (NYSE: XRX) comes into play. The company’s financials show up to $6.7 billion in sales for the past 12 months, and markets are now willing to pay a price-to-sales (P/S) multiple of 0.8x today.
To be conservative, despite HP having more enormous printing revenues, investors can slap a lower 0.7x P/S multiple on HP’s $8.7 billion revenue, which would become roughly $6.1 billion in a theoretical valuation. This will represent approximately a $6.2 boost in either stock appreciation or a special dividend payout per share.
Whichever way management decides to reward shareholders on this potential strategy twist, a $6.2 per share boost would imply a return of 17% from today’s stock price.
How HP's Financial Strength Fuels Its Growth Investment Potential
What initially attracted Buffett to HP may be the one thing that helps other investors name the stock their wealth compounder in a few years. The company's financials show a gross margin of 22.1%, which enables management to allocate capital smartly.
How can investors check for the truth behind this statement? Looking over the returns on invested capital (ROIC) rates will reveal a five-year average of just over 30%, which is incredibly high for a business that had been termed ‘dying’ by many.
Because annual stock price action tends to follow the long-run ROIC rate, HP can set itself up to become a compounder for those savvy enough to understand that dilution of the printing business may be a good idea. Even if this disposal never comes, the company retains so much of its cash flows that it could allow management to start investing in other growth areas.
One of these could be in emerging markets. Because HP sells more affordable PCs than Apple Inc. (NASDAQ: AAPL), it could make a significant splash in emerging markets like India and Africa. As middle-class populations grow, HP’s quality and price points could help the company gain substantial market share in these regions.
Known for taking the long view, it shouldn’t surprise investors to see this international trend as one of Buffett’s thesis for backing HP stock the way he did.
So-called ‘smart money’ may have already noticed this potential breakout, as those at the Vanguard Group saw it fit to boost their positions in the stock by as much as 2.6% as of May 2024, bringing the asset manager’s net investment up to $3.6 billion today.
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