We recently compiled a list of the 10 Cheap Robotics Stocks To Buy. In this article, we are going to take a look at where Autodesk, Inc. (NASDAQ:ADSK) stands against the other cheap robotic stocks.
The progress of Western civilization is built on industrialization. The late 19th century and the mid 20th century solidified the role of machines in factories, leading to vast output improvements and cost benefits that benefited society in the form of high quality, mass produced goods.
Now, the 21st century is the age of information courtesy of the Internet. In developed economies, the services and tertiary sectors reign supreme because human intellect is valued more than the ability to do grunt work. But this doesn’t mean that companies aren’t focusing on industrial production. In fact, estimates from the International Federation of Robotics (IFR) show that the rate of the number of installed industrial robots in America more than doubled in the decade between 2008 to 2018. In 2008, 15,170 industrial robots were installed in the US while this figure had grown by almost three fold to 40,373 in 2018.
This growth is important given that most major American consumer electronics companies shifted their manufacturing and production to China in the 1990s to take advantage of the low costs offered. In fact, this criticality of robots to manufacturing is made clear by the fact that 80% of the industrial robot installations in America in 2018 were in the manufacturing sector.
However, just because America had added tens of thousands of robots by 2018 doesn’t mean that the rest of the world is sitting ‘idle.’ As per the IFR, America was not among the top three countries by the number of industrial robots installed in 2017. This title went to China, which had installed 501,185 industrial robots by 2017 and added another 154,032 units in the following year. In second and third places were Japan and South Korea, with 297,215 and 273,146 industrial robot installations, each. However, having the highest number of robots installed in the world is only one side of the picture. Like humans, robot productivity is also best in groups, and South Korea, Singapore, and Germany were the three highest countries in terms of robot density in 2017.
The key driving factor behind the growth of industrial robots is lower cost according to Cathie Wood’s Ark Invest. In its research, the firm points out that industrial robot costs have dropped by 50% every time their production has doubled. This cost reduction doesn’t mean that robot quality is dropping, since according to Ark’s data, robot performance has improved “33-fold in seven years.” Ark concludes by pointing out that after Jeff Bezos’ eCommerce company installed the Kiva mobile robots, its time from click to ship at a warehouse dropped by 78%.
But what about the value added by robots? After all, the primary motive of a business is profit and if the robotics industry is to thrive then it has to add economic value. On this front, data shows that across industries worldwide ranging from agriculture to construction, mining, and utilities, industrial robots added a cool $211.7 trillion value in 2017. Within these, metals and electronic manufacturing, construction, and chemical manufacturing benefited the most. Across these industries, industrial robots added $2.2 trillion $1.3 trillion, and $1.2 trillion in value, respectively,
Delving deeper, one industry that has seen a lot of hype when it comes to robots particularly humanoid robots, is the automotive industry. This is primarily due to Elon Musk’s belief that his car company can become a humanoid robot company in the future to generate a trillion dollars in revenue per year. We covered this in detail as part of our coverage of $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley, so you should check it out for a detailed primer on the humanoid robot industry.
But while Musk and MS might be bullish for humanoid robots, the natural question to ask when critically analyzing their estimates is whether automotive manufacturing demand is also driving broader industrial robot demand. Looking at the data, we see a mixed picture over the years. For instance, in 2017, 2018, and 2019, the automotive industry added 125,700, 125,581, and 105,379 new robots, respectively. During the same years, the electronics manufacturing industry added 121,955, 105,153, and 87,712 new robots, respectively. So, before the coronavirus pandemic, the automotive industry was the world’s largest customer for industrial robots. Yet, in 2020, this picture changed, as in 2020, 2021, and 2023, the number of new robots demanded by the automotive industry was 79,849, 119,405, and 136,130 new robots, respectively. On the other hand, the electronics industry added 109,315, 136,670, and 156,936 new robots.
This was a historic shift and it displaced automotive dominance in the industrial robotics industry since 1961. As per the IFR, while the automotive production shutdown during the pandemic was to blame for this to an extent as production shutdowns led to delayed investments, between 2015 and 2020, industrial robot installations in the automotive industry had dropped by a compounded annual growth rate (CAGR) of 4% per year. On the flip side, the demand for consumer electronics boomed during the pandemic due to stay at home mandates and the shift to remote working. Coupled with the social distancing mandates in the manufacturing sector, it kicked started a historic shift.
Our Methodology
To make our list of cheap robotics stocks to buy, we started by ranking the holdings of the biggest robotics ETFs by their average analyst share price upside. This was chosen instead of the P/E ratio since several firms are unprofitable. Then, the stocks with the lowest P/E ratios were selected and they were further refined to only include those stocks with an average analyst rating of Buy or better.
For these stocks, we have also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A software engineer using AutoCAD Civil 3D to create a 3D design in a modern office setting.
Autodesk, Inc. (NASDAQ:ADSK)
Number of Hedge Fund Holders In Q1 2024: 52
Price Upside: 10%
Average Share Price Target: $271.57
Autodesk, Inc. (NASDAQ:ADSK) is one of the biggest software companies in the world. It provides design software that allows robot manufacturers and other firms to make their products. Some Autodesk, Inc. (NASDAQ:ADSK) products that cater to robotics include its Autodesk 365 software and Cobot software which allows humans and machines to work together in a manufacturing environment. Autodesk, Inc. (NASDAQ:ADSK)’s dominant role in the design software industry means that instead of growing its customer base, it has to retain customers by continuously upgrading its products to suit their needs. It also allows the firm to benefit from stable recurring revenue, as signing new customers allows Autodesk, Inc. (NASDAQ:ADSK) to earn subscription revenue as well. However, its significant exposure to the industrial sector means that Autodesk, Inc. (NASDAQ:ADSK) can only fire on full cylinders if rates are low and industrial spending is high.
However, there has been some turbulence for the firm recently as outlined by Polen Capital in its Q2 2024 investor letter:
“With Autodesk, most of the stock’s price weakness came in April. The company announced that it would delay the release of its earnings and 10-K filing as it launches an internal investigation regarding its practices on some non-GAAP financial metrics. Upon further analysis, we were encouraged to hear that they were taking this very seriously and being very comprehensive in their investigation. Ultimately, [it] announced it was closing the investigation and that no re-statements would be required. As discussed in the following section, we chose to exit the position in favor of a more attractive investment.
. . . .We sold our small position in Autodesk to help fund our purchase of Shopify. We still think Autodesk is an advantaged business, with 95%+ recurring revenue, dominant in its end market, and nice tailwinds behind digitization in that end market. It should be a durable grower over time, perhaps with continued fits and starts, but we found the risk-reward around Shopify to be more compelling”
Overall ADSK ranks 3rd on our list of the cheap robotic stocks to buy. While we acknowledge the potential of ADSK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ADSK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
