Dassault Systemes Earnings: In Line Results as China Sees Pick Up and Medidata Sees Hard Comparison

Dassault Systèmes reported in line second-quarter results, as high tech drove much of the Americas results, there was a rebound in China, and consumer packaged goods aided European sales. We continue to view shares as fairly valued, as we reconfirm our EUR 37 fair value estimate for the wide-moat company after management reiterated its annual outlook. While we question some of Dassault’s product decisions, like the closed system design of its 3DExperience platform, we continue to believe the company remains well positioned to benefit from the healthily growing CAD and PLM market, which we believe will hit $52 billion by 2032, indicating an 8.4% 10-year CAGR. Even within the growing market, we think Dassault will be able to expand its market share by about 2.5 points over the next 10 years to 31% (reflecting more expansion than Autodesk and PTC, due to Dassault’s wider scope). Altogether, we believe that CAD and PLM vendor consolidation will occur as customers migrate to cloud solutions, aiding the largest players in this market, like Dassault.