Activist investor Starboard Value has acquired a stake in design software company Autodesk (NASDAQ:ADSK). According to a Wall Street Journal report, Starboard has made a hefty $500 million investment in ADSK, intending to drive strategic changes within the company, including restructuring its board composition.
According to the report, Starboard Value has initiated discussions with Autodesk’s executive team to discuss multiple concerns related to the company’s operations, corporate governance, and handling of the recent accounting investigation that adversely affected its stock performance. Starboard suggested that Autodesk should prioritize enhancing its profit margins.
ADSK Stock Performance and Accounting Probe
Autodesk stock has underperformed the broader markets, with a 7.2% decline year-to-date. Moreover, ADSK stock has dropped about 13% since April 1. This downturn came after the company delayed filing its annual report and launched an internal investigation into its accounting practices.
In late May, Autodesk disclosed that its investigation did not lead to any financial restatements.
Starboard has criticized Autodesk for its lack of transparency. The activist investors said that the company did not disclose the accounting investigation and other significant updates related to it until after the shareholder nomination window for director candidates closed in late March. Starboard added that Autodesk’s board was aware of the probe in early March, weeks before shareholders were informed.
Legal Action and Director-Nomination Window
In response to these governance issues, Starboard is contemplating legal action to reopen Autodesk’s director-nomination window and delay the company’s annual shareholder meeting, currently scheduled for July 16.
This move aims to give shareholders a fair opportunity to nominate director candidates and ensure proper governance oversight.
Is ADSK a Good Stock to Buy?
While ADSK stock is under pressure, it recently posted Q1 financial numbers. It reported earnings of $1.87 per share on revenue of $1.42 billion, which fell short of analysts’ estimates. Nonetheless, the company’s adjusted operating margin was 35%, up 300 basis points year over year.
Further, ADSK’s management highlighted that the company is ahead of competitors in 3D artificial intelligence (AI), which is positive. Autodesk’s foray into generative AI and its ability to scale 3D AI solutions set it apart from competitors, positioning it favorably to capitalize on demand and grow its market share.
While the company is advancing well with its AI initiatives, Wall Street is cautiously optimistic about its prospects. It has nine Buys, eight Holds, and one Sell recommendation for a Moderate Buy consensus rating. Analysts’ average price target on ADSK stock is $263.25, which implies 16.6% upside potential from current levels.
