Here's my thinking in a nutshell. The current share price has, in a sense, mortgaged future growth for all future shareholders. In other words, the current price already "bakes in" a perfect future. Management is also troublesome in my estimation.
Here's the specifics of my reasoning:
1) The dilution is terrible. At end 2016, there were 226 million shares outstanding. At the end of 2017, there were 222.7 million shares out, for a net decrease of 3.3 million (obviously). BUT...the company spent 621.7 million to buyback 9.5 million shares at 64.73. They also issued 6.4 million shares for 109 million. I'll spare you the arithmetic, but they bought back at 64.73 per share and issued at 18.69 per share. Not amazing.
2) All animals are equal, but some animals are more equal than others. As revenue has declined over the past three years, management stock compensation (see above) has ballooned.
3) The current price suggests that the market assumes a long term growth rate of this company in the neighbordhood of about 8% in perpetuity. That's a crazy high perpetual growth rate for a company with a history of glowing profits, but for Autodesk it makes all of zero sense.
So...I'll be buying the January 2019 puts with a strike of $92.50 for about $7.50. If they expire worthless over the next year because this insanity continues to grow, I'll just reup at a higher strike with higher profit potential in future. That which can't be sustained, won't be. This share price rise is unsustainable.
Thanks for reading and all the best to you in 2018...unless you're long ADSK (kidding...all the best to everyone).
Submitted December 19, 2017 at 09:09AM by NotPatrickDoyle http://ift.tt/2CEjnX3
