Why Shares of Autodesk Slumped in June

Shares of engineering and design software company Autodesk (NASDAQ: ADSK) declined by 17.2% in June, according to data provided by S&P Global Market Intelligence. The move comes in a weak month for industrial software companies, with the market rife with worries over rising interest rates' impact on economic growth. Slowing growth is an issue for Autodesk because it makes software for the design-and-build (architecture, engineering, and construction) and design-and-make (manufacturing) end markets. As a result, when its customers see more challenging times ahead, they typically cut back on development spending.

The market speculating that economic growth will slow doesn't mean it will necessarily happen. However, it's understandable if investors sell off Autodesk on these concerns. After all, the company could be seen as at risk due to management lowering expectations for free cash flow (FCF) in recent years. For example, it previously told investors to expect $2.4 billion in FCF in fiscal 2023 (the company's 2023 second quarter will end this July) and investors priced that in with assumptions of more growth to come.

However, back in September, management told investors to expect lower FCF in fiscal 2024 because of a change in how it bills customers resulting in more long-term cash flow with less upfront.

Source Fool.com