Dassault Systemes Sees Continued Cloud Growth in Q4, Especially in China; Shares Nearing Fair Value

Dassault Systèmes reported decent fourth-quarter results, as non-IFRS earnings came in exactly at our previous forecasts. While 2022 earnings expectations were higher than we were expecting, revenue guidance was below our forecast. Nonetheless, we are maintaining our EUR 35 ($40) per share fair value estimate for the wide-moat computer-assisted design company. Shares are down 4% upon results, leaving Dassault shares overvalued, in our view. However, if shares fall any more, the stock will likely be within our fair value territory--after a trailing 12 months of what we considered to be an inflated market price. As Dassault shares near our fair value estimate, we reiterate our belief that Dassault Systèmes is a high-quality company with compelling addressable market expansion and strong switching costs that we think aren't going anywhere. We believe the stock had been overvalued over the last 12 months largely due to discrepancies in the market's weighted average cost of capital versus our own--not due to any lack of confidence in Dassault's business as a whole.