Adobe added 464,000 Creative Cloud subscribers in the second quarter, bringing its total subscriber base to about 2.3 million. The company expects to end fiscal 2014 (ending November) with 3.3 million Creative Cloud subscribers, up from its previous forecast of 3 million.
The increased Creative Cloud numbers helped drive up Autodesk stock as the company targets a similar market with its 3ds Max and Maya software. Autodesk is in the process of moving that software to the cloud like Adobe did with the Creative Suite.
"We rate AUTODESK INC (ADSK) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, ADSK's share price has jumped by 54.16%, exceeding the performance of the broader market during that same time frame. Although ADSK had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.5%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.33, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that ADSK's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.18 is high and demonstrates strong liquidity.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Software industry and the overall market, AUTODESK INC's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has declined marginally to $218.70 million or 2.40% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: ADSK Ratings Report