NEW BULLISH Plays
Autodesk, Inc. - ADSK - close: 64.72 change: +1.25
Stop Loss: 61.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 01, 2015
Time Frame: Exit
Average Daily Volume = 3.5 million
New Positions: Yes, see below
It has been a bumpy ride for ADSK investors this year. The company is in the middle of a transition from selling perpetual software licenses to selling subscriptions. It's a move that mirrors larger rival Adobe Systems's (ADBE) transition to a subscription model.
If you're not familiar with ADSK they are in the technology sector.
According to the company,
"Autodesk, Inc., is a leader in 3D design, engineering and entertainment software. Since its introduction of AutoCAD software in 1982, Autodesk continues to develop the broadest portfolio of 3D software for global markets. Customers across the manufacturing, architecture, building, construction, and media and entertainment industries-including the last 19 Academy Award winners for Best Visual Effects-use Autodesk software to design, visualize, and simulate their ideas before they're ever built or created. From blockbuster visual effects and buildings that create their own energy, to electric cars and the batteries that power them, the work of our 3D software customers is everywhere you look."
Year to date the stock is up +7.7%. Yet ADSK is up +53% from its October 2015 low. What's driving the rally? It's certainly not revenue growth.
The company tends to beat Wall Street's bottom line earnings estimates but revenues have been soft. The company has lowered their guidance multiple times this year.
Their most recent earnings report was November 19th. ADSK reported Q3 results of $0.14 a share. That beat expectations. Revenues fell -2.9% to $600 million. Management lowered their Q4 guidance. Yet they raised their 2016 outlook for the first time in several months. The improved 2016 outlook certainly helped. There was a brief sell-off in the stock (Nov. 20th) but ADSK quickly recovered.
One of the main reasons ADSK has performed so well lately is the market's hope that two major activists investors will do something to unlock more value. Eminence Capital owns a 5.8% stake in ADSK. Sachem Head Capital recently disclosed at 5.7% stake. The two activist funds have teamed up together (a combined stake of 11.5%). Expectations that these activists will drive change in ADSK has fueled a significant rally.
Today shares of ADSK have rallied toward major resistance at the $65.00 level. A breakout here would reaffirm that the bullish trend is still intact. The point & figure chart is bullish and forecasting a long-term target at $103. We want to hop on board if ADSK can break through the $65.00 level. Tonight we are suggesting a trigger to launch positions at $65.25. The stock can be somewhat volatile so I am suggesting small positions to limit risk.
Trigger @ $65.25 *small positions to limit risk*
- Suggested Positions -
Buy ADSK stock @ $65.25
- (or for more adventurous traders, try this option) -
Buy the JAN $67.5 CALL (ADSK160115C67.5) current ask $1.43
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike