Autodesk, Inc. (ADSK): Is it Time to Buy the Latest Tech Company to Warn?

Essentially, the manufacturing sector has been weak as both Fastenal and MSC Industrial confirmed in their earnings reports that are discussed here. Both companies have limited visibility and short sales cycles. MSC Industrial Direct Co Inc (NYSE:MSM) saw sequential weakness in the quarter to the end of March, and with Autodesk saying that its April got weaker then this is hardly good news for MSC.

It was a similar story with Fastenal Company (NASDAQ:FASST), though interestingly it saw stronger results in its metal work operations. I think this is partly due to having more exposure to aerospace and automotive. Investors in the industrial manufacturing sector should watch the statements of these two companies quite closely while also keeping an eye on the ISM numbers.

As for Adobe Systems Incorporated (NASDAQ:ADBE), its shift looms large in Autodesk, Inc. (NASDAQ:ADSK)’s thinking because the former has started to regenerate growth in its core product range thanks to the shift to SaaS and subscription-based sales. At some point Autodesk may well emulate Adobe’s model of ending perpetual license sales (which will cause some short-term revenue shortfalls as customers shift), but until then we shouldn’t model too much of these effects onto Autodesk’s numbers. Prospects for Adobe look good in the mid-term but will it hit is (raised) expectations this year, bearing in mind how many other tech companies have warned in the first quarter?

Where next for Autodesk?

In conclusion, I think that it makes sense to wait for more evidence of a pick-up in general industrial conditions before buying into Autodesk, Inc. (NASDAQ:ADSK). I’ve no doubt that many will be tempted into buying in after the fall as this has been a good tactic this quarter, but cautious investors may want to wait to avoid buying in while the stock still has room to fall.

The article Is it Time to Buy the Latest Tech Company to Warn? originally appeared on Fool.com and is written by Lee Samaha.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.