Dassault Systèmes Earnings: Promising Subscription Growth Buoys Results

We maintain our EUR 37 fair value estimate for wide-moat Dassault Systèmes after the firm reported fourth-quarter results largely in line with our expectations. We are pleased with the firm’s progress in increasing subscription-based revenue, as we believe this will ultimately benefit long-term returns. Management provided 2024 and first-quarter targets, baking in guidance for softer license sales as the firm focuses on subscription conversions, as well as foreign-exchange headwinds. While the stock dropped around 10% on Feb. 1 due to the lower-than-expected guidance, we still view it as overvalued. Despite near-term headwinds, we think the firm is well positioned to benefit from the growing computer-assisted design and product lifecycle management markets, which we believe will hit $52 billion by 2032, indicating an 8% 10-year compound annual growth rate.