Autodesk Top Pick at Morgan Stanley Amid Margin Opportunities, Robust Catalyst by Investing.com

Investing.com — Morgan Stanley named Autodesk Inc (NASDAQ: ) stock is the top pick, citing a margin expansion opportunity and a solid catalyst path.

Analysts at the bank see Autodesk’s stock, which currently trades at a discount to its design software peers, poised for a significant rally.

ADSK rose 1% in premarket trading on Monday.

Following the company’s recent earnings call, in which management outlined its goal of achieving “industry-best GAAP margins,” Morgan Stanley analyzed Autodesk’s margin potential, concluding that the company is positioned for a well above market earnings per share (EPS) growth. expectations.

To be more specific, Autodesk’s current GAAP operating margin of 22% is expected to expand to nearly 29% by fiscal 2028, placing it at the higher end of its peer group. Morgan Stanley’s pro forma analysis points to 8% non-GAAP EPS growth for fiscal 2026-2028.

The company’s valuation shows that Autodesk is on track to capitalize on both organic growth opportunities and accounting benefits from its new transaction model, which improves the company’s revenue recognition and increases operational efficiency.

“We see a favorable risk/reward opportunity for both EPS and multiple expansion,” Morgan Stanley analysts noted.

Despite external challenges, such as the evolving macroeconomic environment and focus on cost control, Autodesk’s shift toward greater operational efficiency, including improved sales productivity and the implementation of long-term contracts, is expected to drive sustainable growth.

Analysts also highlighted several other future catalysts for ADSK, including potential tailwinds from a lower interest rate environment and recent activist engagement aimed at improving the company’s execution.

“In addition to EPS, a robust catalyst trajectory and discounted valuation to peers frame a favorable entry point and a >2:1 bull/bear bias,” the analysts pointed out.

They reiterated an overweight rating on the stock and a $320 price target.