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A Wide-Moat Stock to Keep on Your Radar

This company is currently trading above fair value, but its high customer-switching costs, recent internal investments, and large user network are reasons to put it on your watchlist.


Andrew Lange: Autodesk is a market-leading provider of computer-aided design, or CAD, software. We think the company is deserving of a wide economic moat based upon high customer-switching costs and its large network of users.

The company's clients are averse to switching given the time required to learning a new platform, the risk of downtime, and the monetary cost associated with switching. We think Autodesk will remain a market leader over the long term given its commitment to evolve to changing market trends. And recent investments in mobile and social suites and cloud-based solutions exemplify this.

In addition, the company is currently switching to a subscription-based pricing model, which will provide it with greater recurring revenue, greater long-term value, and more financial predictability.

We currently have a $51 fair value estimate on the company. We would recommend that investors seek a wider margin of safety before investing, but the company is a high-quality name and one which they should keep on their radars.

Andrew Lange does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.