Autodesk (NASDAQ) shares are down 4.7% year to date, due in part to an underwhelming quarter which exceeded expectations but did not disappoint investors.

Even if they are handsome, earnings beats will not be enough to lift a stock’s share price higher than a trailing multiple of 46.7x.

Investors might pay too much attention today to the small margins of the company as it moves further into cloud. Instead, they should focus on long-term opportunities for margin growth.

COVID-19 has led to many stumbles for AutoCAD, the well-known software provider in architecture and engineering design. However, the stock’s fundamentals remain intact and its recent underperformance allowed it to increase in value.

Even though the price is high, I’m bullish about the stock and believe that it can recover within the next two-years. Here’s why.

While near-term COVID-plagued performance seems to have clouded the longer-term growth story which remains in full force, it is not impossible for them to change. Autodesk’s long-term prospects are not being overlooked. (See Insiders’ Hot Stocks on TipRanks)

Autodesk Reaches for the Clouds

Autodesk could see a substantial and long-term margin increase due to its multi-year strategy of integrating its software suite with cloud computing. Clients would be able to test new products more easily if they subscribe to cloud-based services.

The integration strategy is certain to pay significant dividends and seems to match the Adobe (NASDAQ) aggressive cloud push of a few years back.

Can Autodesk be the same for engineers and architects as Adobe was for creatives. Although it is possible, there are likely to be some bumps in the road.

Autodesk is also a company that caters specifically to artists. Maya, its multi-purpose graphics program is the flagship product.

Maya continues to add to Autodesk’s impressive $1.9 Billion cash position. It is difficult not to fall in love with it.

Delivering Customers the Products They Need

Autodesk’s pay-as–you-go token flexible licensing model may be a significant sales driver in the long term, along with the vigorous cloud push. Not the obsolete licensing model of the past, but pay-as you-go is the future for customers in cloud age.

Autodesk Flex (NASDAQ:) launched last month and may make customers happier. The Flex (NASDAQ:) offering could become a significant driver of revenue for years to come. Paying more to firms will result in higher revenues, while those who pay less will enjoy a greater share of the profits. It’s pretty common with pay-as–you-go.

In fact, smaller users can save money and redirect their efforts towards growth. Small-scale users could be granted the tools to grow their business, so that they will have a greater usage appetite.

These firms have greater financial freedom and will be willing to try new features or products. This could lead to greater adoption of innovative products and features sooner.

Flex makes long-term sense for Autodesk and its clients.

Wall Street Take

According to TipRanks’ analyst rating consensus, ADSK stock comes in as a Strong Buy. Of the twelve analyst ratings available, 10 Buy recommendations are made and two Hold recommendations.

The average Autodesk price target is $352.70. The price target for analysts varies from $295 to $400, with the lowest being $250 per share.

Bottom line

Autodesk saw a 16% increase in revenues year-over-year for the second quarter thanks to strong 21% subscription growth. The stock fell despite another beat in EPS.

Are investors losing sight that long-term growth is more important than short-term pressures or fears about higher rates?

Perhaps. Autodesk’s extensive suite of products has an advantage that may grow as it focuses on user satisfaction and lays the foundation for significant average revenue per user (ARPU)

Disclosure: Joey Frenette does not own any shares in the companies mentioned at time of publication.

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