Autodesk (ADSK) stock rose 5% on Monday after the design software company signaled that it will not be pursuing the PTC (PTC) deal. In a very brief update, the company said that it plans to focus on strategic priorities and pursue only “targeted and tuck-in acquisitions.” Citing sources familiar with the matter, a Bloomberg report also stated that ADSK has decided to shelve the potential acquisition of PTC. Last week, ADSK stock fell on speculation that the company was considering acquiring computer software and services firm PTC.
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Autodesk Puts an End to PTC Deal Speculation
Last week, Bloomberg reported that Autodesk is exploring the acquisition of rival PTC in a cash-and-stock transaction. The deal could have been one of the year’s largest acquisitions, potentially valued at $30 billion.
While Autodesk didn’t mention PTC in its update yesterday, the company said that it plans to drive long-term shareholder value and remains focused on executing its “established strategic priorities” in cloud, platform, and artificial intelligence (AI).
The company also stated that it is optimizing its sales and marketing to enhance its margins. Additionally, Autodesk continues to make share buybacks, backed by growing free cash flows.
Analysts Cheer the “No Deal” News
Following the update, Bank of America Securities analyst Michael Funk reiterated a Hold rating on Autodesk stock with a price target of $330, saying, “Potential PTC acquisition likely off the table.” Funk noted that in its update, Autodesk reemphasized its capital allocation strategy, including organic investments, targeted tuck-in acquisitions, and continued share repurchases.
Funk stated that he was “encouraged by the reiteration of focus” on Autodesk’s core strategic initiatives, as he believes that investors’ appetite for significant mergers and acquisitions is low. Funk thinks that ADSK stock’s performance will now be driven by its ability to execute the ongoing business transformation initiatives, mainly the new transaction model, and continued progress in margin expansion.
Likewise, Citi analyst Tyler Radke reiterated a Buy rating on Autodesk stock with a price target of $376, saying that he views the company’s update as “an incremental positive,” given its timing and the latest Bloomberg report suggesting that ADSK is no longer interested in a potential PTC deal. That said, the 4-star analyst views the “targeted” language as rather vague. Nonetheless, Radke remains bullish on ADSK stock with a greater probability of a no-deal scenario, as the company continues to focus on driving selling and marketing efficiency and bolstering its long-term growth profile.
Is ADSK Stock a Good Buy?
With 17 Buys and five Holds, Wall Street has a Strong Buy consensus rating on Autodesk stock. The average ADSK stock price target of $345.11 indicates a 17.2% upside potential from current levels.
