Corporate Software Demand Stays Red Hot: Stifel’s 4 Focus Stock Picks

The evolution of software as a tool for business has been a long and continuing strong growth story. Companies increasingly are upgrading and adding new software as a productivity enhancement to improve operations and help evolve business, as well as to protect important digital assets.

A new Stifel report notes that recent commentary from management executives toward the sector was extremely positive from a demand standpoint. The analysts feel that the software group will see growth well above the trend line in coming years, driven by this secular demand that shows no signs of abating.

Four top companies are focus picks at Stifel. While all are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Autodesk

This stock has been sizzling and looks poised to move higher. Autodesk Inc. (NASDAQ: ADSK) provides 3D design, engineering and entertainment software and services worldwide. Its AutoCAD Civil 3D is a surveying, design, analysis and documentation solution for civil engineering, including land development, transportation and environmental projects

Its BIM 360 is construction management cloud-based software. AutoCAD is software for professional design, drafting, detailing and visualization, while AutoCAD LT is drafting and detailing software and computer-aided manufacturing (CAM) software for computer numeric control machining, inspection and modeling for manufacturing.

The company also provides Fusion 360, a 3D CAD, CAM and computer-aided engineering tool, as well as Industry Collections tools for professionals in architecture, engineering and construction, product design and manufacturing, and media and entertainment collection industries.

Autodesk provides Inventor tools for 3D mechanical design, simulation, analysis, tooling, visualization and documentation. Vault is data management software to manage data in one central location, accelerate design processes and streamline internal/external collaboration. Maya and 3ds Max software products offer 3D modeling, animation, effects, rendering and compositing solutions, and Shotgun is cloud-based software for review and production tracking in the media and entertainment industry.

Stifel noted this after meeting with Autodesk management recently:

Coming off the heels of Autodesk’s healthy fiscal first quarter 2022 print, the conversation primarily spanned Autodesk’s strategy and opportunity in Manufacturing, with a focus on the growing cloud adoption of design software, Fusion 360, Upchain, recent news around a potential transaction with Altium, and generative design. Overall, we come away confident in Autodesk’s ability to continue gaining share in manufacturing giving its leading cloud-based offerings. More broadly, we continue to believe Autodesk remains very well-positioned as AEC/manufacturing end-markets recover and think the company has a number of secular (digital transformation of the construction lifecycle, convergence of design/make, etc.) and company-specific unit and pricing drivers to sustain mid-teens top-line growth along with operation margins and free-cash-flow expansion in coming years.

Stifel has a $342 price target on Autodesk stock, which compares with a Wall Street consensus target of $333.24 and Monday’s closing price of $280.52 per share.

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