Starboard reveals stake in Autodesk: is it a positive for ADSK shares?
Autodesk Inc (NASDAQ: ADSK) is up 5.0% on Monday after Starboard Value revealed a sizable stake in the graphic designing software maker.
Details of Starboard’s stake in Autodesk
The activist hedge fund led by Jeff Smith announced a $500 million stake in ADSK today.
Autodesk failed to “disclose material malfeasance in accounting and disclosure practices” before its 2024 annual meeting of shareholders in April.
The timing did not sit well with Starboard as it disabled an investor from nominating its own candidates. The activist fund also sees potential for margin improvement and expects better investor communication to deliver a boost to Autodesk stock, as per its letter to the board today.
“We are confident in our strategic direction, significant margin opportunity, and our corporate governance” – as per an ADKS spokesperson.
ADSK shares are currently down more than 10% versus their year-to-date high. Still, analysts at Goldman Sachs do not find it an opportunity to build a position in the Nasdaq-listed firm.
They continue to rate it at “sell” with a price target of $225 that’s roughly in line with the stock’s previous close. Autodesk stock does not pay a dividend at writing – so the story is not attractive from that angle either.
Why isn’t Autodesk stock a great pick?
Autodesk stock may not be a great pick, for now at least, because Starboard is considering a legal action against the software giant to have the window for nominating directors reopened and delay the annual meeting that’s currently scheduled for 16th July.
All of it spells uncertainty for ADSK shares at the moment.
In May, Autodesk reported its financial results for the first quarter that topped Street estimates. The $51 billion company based out of San Francisco, California issued upbeat guidance for the future as well.
Still, analysts at Goldman Sachs are not entirely convinced that ADSK will be able to continue growing at a solid pace due to cyclical headwinds and risks related to executing a new transaction model.
Plus, the free cash flow remains under scrutiny due to the aforementioned internal investigation as well.
The future of Autodesk stock, therefore, relies partially on whether Starboard pushes for board seats, and if it does win them, whether it succeeds in making changes that fix the ongoing issues and deliver a boost to the financial performance.
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