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Investing.com - Citi has reiterated its Buy rating and $376.00 price target on Autodesk (NASDAQ:ADSK), currently trading at $280.39 with a market capitalization of $60 billion, following reports that the company is exploring an acquisition of PTC (NASDAQ:PTC). InvestingPro data shows the company maintains impressive gross profit margins of 92%.
The reiteration comes after Bloomberg reported Wednesday that Autodesk is considering acquiring PTC, according to unidentified people familiar with the matter. The news has negatively impacted Autodesk shares, which have declined 8.6% since the deal headline broke, contributing to a significant 11.07% drop over the past week. According to InvestingPro analysis, the stock’s RSI suggests it has entered oversold territory.
Citi expressed concern that a potential PTC acquisition could derail Autodesk’s margin expansion and free cash flow compounding at a critical moment. The firm noted that Autodesk is currently executing better, guiding more prudently, and operating more efficiently.
The research firm highlighted that Autodesk is "almost out-of-the complexity tunnel" with free cash flow reaching new highs following years of financial model transitions. Citi sees a good opportunity in Autodesk stock in a no-deal scenario.
Citi warned that downside risks could intensify if Autodesk proceeds with the acquisition, despite acknowledging that the talks might be exploratory and part of due diligence.
In other recent news, Autodesk has reiterated its focus on cloud, platform, and artificial intelligence strategies as part of its ongoing efforts to drive long-term shareholder value. The company plans to optimize its sales and marketing operations to achieve higher margins and intends to allocate capital towards organic investments and targeted acquisitions. Additionally, Autodesk aims to continue its share repurchase program as its free cash flow increases. In the realm of potential mergers, reports suggest Autodesk may be considering acquiring PTC in a stock and cash deal. This potential acquisition has led RBC Capital to raise its price target on PTC, noting possible cost synergies and complementary product offerings between the two companies. Meanwhile, Morgan Stanley (NYSE:MS) has maintained its Overweight rating on Autodesk, highlighting the strategic benefits PTC’s assets could offer. Furthermore, Berenberg has upgraded Autodesk’s stock rating from Hold to Buy, citing significant margin expansion opportunities and projecting a 16% compound annual growth rate in earnings. These developments reflect Autodesk’s strategic maneuvers in enhancing its market position and expanding its capabilities.
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