Nobody Is Talking About This AI Stock | The Motley Fool
When it comes to the latest trends in investing, artificial intelligence (AI) is at the top of the list. Companies like Nvidia and Microsoft, which are involved in the AI industry, have seen their stock prices soar in 2022, with the Nasdaq 100 index reaching all-time highs. However, there is one company that seems to have been overlooked as an AI beneficiary: software giant Autodesk.
Autodesk has been investing in generative AI tools for its customers for years, providing architects, engineers, and construction workers with vital resources. Despite this, Autodesk stock has only gained 11% this year, trailing behind the approximate 15% return of the S&P 500 in 2023.
Autodesk is a leading provider of software solutions for architects, engineers, and workers in the construction industry. Their products, such as Revit, Fusion 360, and Autodesk Construction Cloud, are widely used to design and manage engineering, construction, and infrastructure projects.
In recent years, Autodesk has integrated generative AI tools into its software programs, allowing customers to save time and gain valuable insights. For example, engineers can now use Autodesk’s generative AI tools to set a range of parameters and have the software program run simulations to optimize product performance.
The potential for Autodesk to grow its business is enormous, given that the construction industry is one of the largest and least digitized industries in the world. Autodesk consistently raises prices as it adds new capabilities to its software programs, such as cloud collaboration and generative AI tools.
Management believes that Autodesk can achieve a revenue growth rate of 10% to 15% in the foreseeable future and reach 40% profit margins. This year, the company has projected annual revenue of around $5.4 billion, with the possibility of reaching $10 billion in annual revenue by 2030, if it grows at a rate of 10% per year.
Despite its strong growth prospects and leadership in AI software development, investors should not buy Autodesk stock simply because it is considered a hot AI play. Instead, investors should focus on the earnings Autodesk will generate in the future relative to the current stock price.
With a market cap of $44 billion, Autodesk stock appears to be undervalued. If the company achieves a 40% profit margin in 2030, it could generate $4 billion or more in annual earnings on $10 billion in revenue. This would result in a forward price-to-earnings ratio (P/E) of just 11, assuming the stock maintains its current price. However, given its growth prospects and dominant position in the design software space, Autodesk is likely to trade at a higher P/E ratio.
Considering all these factors, Autodesk stock seems like a solid buy at its current prices and a promising long-term investment for those seeking exposure to AI in their portfolio.
