Updating Autodesk, Mercadolibre, and Synopsys

A number of companies we follow reported earnings this week. Instead of doing a number of small articles, we'll just review in one larger one. Here are the latest updates and thoughts on Autodesk (ADSK), Mercadolibre (MELI), and Synopsys (SNPS).

Autodesk (ADSK)

Autodesk met expectations with a 9% year-over-year increase in revenue for Q4, +12% if you account for the stronger U.S. dollar vs. the same period a year ago. For the year it was a solid 14% increase (15% in constant currency). I was also impressed by the company's 40.6% free cash flow margin for the year, which is well higher than our 34% model.

Autodesk continues to keep plugging along, and the company's incredibly wide moat should protect its sales and profits for years to come. The firm sees a major growth catalyst in the proliferation of connected, cloud-based digital workflows in the architecture, construction, and civil engineering spaces. This should allow Autodesk to build out their Construction Cloud offering to clients they already do business with.

Long-term, our model is still looking good. Management continues to guide the business to the "rule of 45", which just means 10-15% long-term annual revenue growth, combined with 30-35% long-term free cash flow margins. All of this tracks well to our fair value assumptions. In fact, after updating the model with annual results, I believe a slight bump is warranted, and we're raising the fair value price from $262 to $286, a 9% increase.

Mercadolibre (MELI)

Mercadolibre's Q4 and fiscal year results were excellent. Revenue was up 40% for the quarter, and 49% for the entire year, both outstanding figures that illustrate the company's continued dominance in Latin American e-commerce and fintech.

It is really the fintech unit that is leading the way for this company. While marketplace metrics were solid, with 13% growth in both items sold and shipped, the firm produced a massive 63% gain in payment transactions processed through MercadoPago. Unique users of its payment solutions grew 27%, and total payment volume (TPV) was up 80% after adjusting for currency. "Off-platform", which simply means MercadoPago transactions that were not driven through their own marketplaces, TPV grew an amazing 125%! This unit really does remind me of an early stage PayPal - the trajectory is almost exactly the same.

Finally, I was also encouraged by the continuing decline in loan loss provisions, a risk mentioned in the original write-up. They have declined in each of the past 2 quarters, from $303 million in Q2 down to $228 million this quarter. Management has wisely slowed down their credit card originations to get the underwriting under control, so we will continue to keep a close eye on this.

It was just another all-around solid quarter from this strong performer. I'm raising the fair value target to $1,409 from $1,275, a hefty 11% increase.

Synopsys (SNPS)

It was a seasonally slow quarter for Watch List stock Synopsys, with revenues up only 7%, although for the fiscal year the figure was a very healthy 21%. Not much of interest really in this quarter. Management continues to guide to 14-15% revenue growth for fiscal 2023, with 18-19% earnings growth. This company has a very strong position in semiconductor design software and owns a leading collection of re-usable IP blocks, both of which we expect it to maintain for decades more. I see no reason to modify the $282 fair value price. Synopsys' stock still looks a bit pricey to buy anytime soon.