NEW YORK ( TheStreet) -- I always marvel at how quickly the Street can shift its stance on a company whenever convenient, even though the narrative has not drastically changed.
Last summer, when Autodesk (ADSK) shares dropped to $33 per share, (at the time, a two-month decline of 20%), analysts complained that management had done a poor job of identifying the company's next strategic move. There were also concerns that the architectural software designer was confused about what phase of growth it was in.
Making matters worse, despite the stock's decline, the Street insisted that shares were expensive. Although I believed that execution fears were exaggerated, the valuation concerns were valid. At the time, Autodesk investors didn't see a problem paying 3-times the multiple of Microsoft (MSFT) and almost 4-times that of rival Cadence Design (CDNS).
But beyond Autodesk's stock price, there was plenty to love. I credited management for how well they have navigated a tough IT spending environment, and the company maintained decent margins and executed some tough cost-control initiatives.
It didn't seem as if investors' expectations aligned with the company's absolute performance. Although the company was struggling with license revenue, the results didn't diverge that drastically from license results from Oracle (ORCL) and Red Hat (RHT). But I was in the minority.
Fast-forward six months later, Autodesk stock is at $55, up 66%. Analysts now pretend they'd sided with the company all along.
The current sentiment is excitement with the company's proposed changes. This includes an entry in the SaaS (software as a service) model. Although the company's fundamentals remain strong, it's too early to predict the value Autodesk can extract from the improved global manufacturing economy. There are reasons to be optimistic, but the environment is far from robust.
The good news is Autodesk management no longer seems content with the company's mature slow-moving growth status and are willing to now take the sort of risks needed to reward shareholders. The question, though, is how much more value is there for a stock that has already soared 66% in six months?The Street will be looking for 34 cents in earnings per share on revenue of $573 million when Autodesk reports fourth-quarter earnings results Wednesday. This represents year-over-year declines in both earnings per share and revenue of 35% and 5.6%, respectively. But that's not as bad as it looks. As I've said, the company is in the midst of a meaningful business model transition.
I've always liked the company's prospects, especially when the stock was 60% lower. The focal point of the conference call will be the level of confidence management shows in the conversion process. It's a tall task. And it's the sort of endeavor known to take a significant toll on near-term margins.
Beyond the uncertainty surrounding manufacturing expansion, investors should pay strict attention to what management says about the conversion status. More importantly, how quickly can the company move towards the more popular subscription-based model? Let's not forget, it took Adobe (ADBE) almost two years to switch from the traditional boxed-software model.
This means this quarter's absolute results will be immaterial. The direction the stock takes will be based more on management's guidance.
For now, despite the clear signs that the worst is over for this company, I don't see too much upside in these shares beyond, say, $58. This represents a 5% premium. But I'm convinced that the easy money has already been made. Autodesk now trades on much higher expectations.
That's not to say they can't be met. But with earnings and profits projected to decline over the next several quarters, I'd rather place my money elsewhere.
At the time of publication, the author was long AAPL.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.