Autodesk Stock Rises After Starboard Value Takes a Stake

Autodesk (ADSK) stock jumped more than 4% at the start of trading Monday after a report in The Wall Street Journal indicated activist investor Starboard Value has built an estimated $500 million stake in the global software firm.

Starboard's concerns are centered around Autodesk's operations, corporate governance and how the company handled a recent accounting probe, the WSJ said, citing people familiar with the matter. Starboard thinks Autodesk should improve its margins and make changes to its board of directors and it recently met with ADSK management to discuss these issues.

As part of its activist investing push, Starboard is also weighing legal action to reopen Autodesk's director-nomination window and to delay the company's annual shareholder meeting, which is currently scheduled for July 16, The Wall Street Journal report indicated.

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"We are confident in our strategic direction, significant margin opportunity, and our corporate governance," an Autodesk spokesperson said, according to the WSJ, adding that it welcomes constructive feedback from shareholders.

Autodesk stock has a market cap of about $51 billion at the time of this writing, so Starboard’s estimated $500 million stake would be roughly 1% of the company. While it's a large amount of money, it still does not make Starboard a top 10 stakeholder in Autodesk. Currently, The Vanguard Group and BlackRock are the largest stakeholders, owning roughly 9% and 8.5% of the company, respectively.

Is Autodesk stock a buy, sell or hold?

Even though the tech stock has drastically underperformed the broad market this year, down 2.6% for the year to date vs the S&P 500's nearly 14% gain, analysts are bullish. 

According to S&P Global Market Intelligence, the average analyst target price for ADSK stock is $270.20, representing implied upside of more than 14% to current levels. Additionally, the consensus recommendation is Buy.

Financial services firm Oppenheimer is one of the bullish outfits on ADSK stock with an Outperform rating (equivalent to a Buy) and a $275 price target.

"We expect Autodesk to deliver durable high-teens to low-20% earnings growth powered by double-digit revenue growth, and consistent margin expansion in the mid to long term," Oppenheimer analyst Ken Wong wrote in a June 12 note. "We also believe Autodesk is well positioned to capitalize on the digitization of the construction market, which remains a significantly large ($12 billion total addressable market) analog end-market."

Oppenheimer's $275 price target represents implied upside of over 16% to current levels.

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