Company Reports

We maintain our EUR 37 fair value estimate for wide-moat Dassault Systemes after the firm reported first-quarter results that were slightly light compared with our expectations. Management also affirmed previously issued full-year guidance and provided a second-quarter outlook consistent with our model. We conclude that the firm is on track to meet its 2024 targets and is making progress in expanding subscription-based revenue, which we believe serves the best interest of shareholders. The stock has dropped from a high of EUR 48 in January, and we now view it as fairly valued. 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.

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.

Dassault Systèmes has a hold on the computer-assisted design software market for autos, aerospace and defense, and manufacturing. With 90% of all aircraft and 80% of all autos globally made via Dassault software, we believe the company will stay well entrenched with engineering teams with help from its significant switching costs and network effect found in its midmarket CAD software, SolidWorks. In our view, the wide-moat company has adapted well to new trends in its market exposures, such as electric vehicle design software, which has made us more confident in the longevity of its moat and ability to achieve excess returns on invested capital.

Dassault Systèmes reported results right in line with our expectations—thanks to a boost in upfront license revenue and strength in its industrial innovation software. While this quarter saw upfront license revenue strength, conversion to subscriptions is progressing at a healthy pace—which we think will bode well in the long term, carrying a host of benefits from increased customer retention to easier upselling. The firm is still experiencing meaty foreign exchange headwinds, but with this baked in previously, management has maintained its outlook for the year. Shares are up 2% upon results and remain near our EUR 37 fair value estimate, which we reiterate for the wide-moat firm. While we believe Dassault shares are fairly valued at the moment, for investors looking to enter the moaty CAD software market, we think Autodesk is attractively priced given our $247 fair value estimate, as the firm boasts additional undervalued greenfield opportunities—like building information modelling, or BIM.

Dassault Systèmes has a hold on the computer-assisted design software market for autos, aerospace and defense, and manufacturing. With 90% of all aircraft and 80% of all autos globally made via Dassault software, we believe the company will stay well entrenched with engineering teams with help from its significant switching costs and network effect found in its midmarket CAD software, SolidWorks. In our view, the wide-moat company has adapted well to new trends in its market exposures, such as electric vehicle design software, which has made us more confident in the longevity of its moat and ability to achieve excess returns on invested capital.

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.

Dassault Systèmes’ Capital Markets Day was filled with walkthroughs of the company’s digital twin tactics to stay relevant in the changing world of computer-aided design, or CAD, and product lifecycle management, or PLM. But on top of product strategy talks came news of the company’s appointment of Pascal Daloz as CEO, effective January 2024. Daloz is currently Dassault’s deputy CEO and has been a member of the board of directors since 2020. Current chairman and CEO Bernard Charlès will remain chairman of the board after the transition. Overall, we think the management change will do little to rock the boat in terms of the company’s overall strategy. We reiterate our EUR 37 fair value estimate for the wide-moat name, which places the stock in 3-star, fairly valued territory. For investors looking for entry points into this moaty market long dominated by few players, we recommend Autodesk shares, which we believe are undervalued given our $240 fair value estimate.

Dassault Systèmes reported generally in-line first-quarter results. Total revenue and earnings per share came in right at our expectations. However, the shares dipped after the report as the market appeared to be unhappy with software revenue coming in under expectations, even though services revenue outperformance made up the difference. We are not as shaken by the more moderate software results, since the weakness stemmed from China, which is showing signs of a pickup. As a result, management’s outlook for the year is unchanged. We are maintaining our EUR 37 ($41 with updated foreign exchange) fair value estimate for the wide-moat computer-assisted design company. We view the shares as fairly valued and stress that this a rarity over the last six years, when we have often found them to be overvalued.

Dassault Systèmes has a hold on the computer-assisted design software market for autos, aerospace and defense, and manufacturing. With 90% of all aircraft and 80% of all autos globally made via Dassault software, we believe the company will stay well entrenched with engineering teams with help from its significant switching costs and network effect found in its midmarket CAD software, SolidWorks. In our view, the wide-moat company has adapted well to new trends in its market exposures, such as electric vehicle design software, which has made us more confident in the longevity of its moat and ability to achieve excess returns on invested capital.

Dassault Systèmes reported strong fourth-quarter results. We were pleased to see the firm clock in hefty subscription revenue growth even with overall weakness in China. In our view, the market reacted positively to the company’s strong constant currency outlook for fiscal 2023. Shares are up over 10% upon results, but we still believe Dassault shares are fairly valued. We are maintaining our EUR 37 ($40) per share fair value estimate for the wide-moat computer-assisted design company. Overall, we remain impressed by Dassault’s resilience in its core CAD and PLM markets and optimistic about its growth areas, such as in drug development.

Dassault Systemes has a hold on the computer-assisted design software market for autos, aerospace and defense, and manufacturing. With 90% of all aircraft and 80% of all autos globally made via Dassault Systemes software, we believe the company will stay well entrenched in engineering teams with help from its significant switching costs and network effect found in its midmarket CAD software, SolidWorks. In our view, the wide-moat company has adapted well to new trends in its market exposures, such as electric vehicle design software, which has made us more confident in the longevity of its moat and ability to achieve excess returns on invested capital.

Dassault Systèmes reported a nice quarter, beating our expectations on all fronts—thanks to foreign exchange tailwinds for the wide-moat French software firm. Despite the nice results, shares are down approximately 3% near EUR 35, which we attribute to management’s lower growth expectations (in constant currency) for license and other software revenue for the year. On the bright side, guidance for recurring revenue growth (in constant currency) was upped at the high end. We view recurring revenue as a more important long-term value driver for the firm over software licenses, as subscriptions continue to make up a greater mix of the business. We think this mix shift will persist even if the rate at which this is occurring is more gradual than some investor would like. We much prefer Dassault’s gradual nudging of customers toward subscriptions compared with a forced, abrupt switch that could leave customers frustrated. All things considered, we reiterate our EUR 37 fair value estimate for Dassault, which leaves shares fairly valued.

Dassault Systemes has a hold on the computer-assisted design software market for autos, aerospace and defense, and manufacturing. With 90% of all aircraft and 80% of all autos globally made via Dassault Systemes software, we believe the company will stay well entrenched in engineering teams with help from its significant switching costs and network effect found in its midmarket CAD software, SolidWorks. In our view, the wide-moat company has adapted well to new trends in its market exposures, such as electric vehicle design software, which has made us more confident in the longevity of its moat and ability to achieve excess returns on invested capital.

Dassault Systemes reported nice second-quarter results, beating our top-line and adjusted earnings per share expectations as momentum continues in its subscription and cloud business. While Dassault did not overlook macroeconomic uncertainty for the remainder of the year, foreign-exchange effects look to be in its favor, inching its absolute outlook upward, while constant-currency growth is expected to remain stable. We view the shares as fairly valued and confirm our EUR 37 fair value estimate for the wide-moat company, as absolute improvements related to foreign exchange are more short-term in nature. We are impressed by Dassault's expansion into cutting-edge territories like human body drug testing simulation or robust sustainability modeling.

Dassault Systemes' June 16 capital markets day had a consistent message: The view that Dassault is just an aircraft modeling company is outdated. We agree with the wide-moat firm on its self-perception, as it is clear to us that Dassault is catering to new markets pertaining to what we call the enterprise metaverse. We define the enterprise metaverse as the use of digital worlds to further enterprise goals like shorter time to market for manufacturers. After the capital markets day, we are confident in reiterating our EUR 37 fair value estimate. This leaves Dassault trading in 3-star territory, and thus we recommend that investors hold off from buying or selling the stock.

Dassault Systemes reported robust first-quarter results, as 3DExperience not only is the name for the company's core platform offering but also could refer to the quarter's three-dimensional beat. Revenue, operating margins, and non-IFRS earnings all beat our expectations as short- and long-term tailwinds drove results. Management raised guidance for 2022 as a result, informing our value estimate change to EUR 37/$39 per share from EUR 35/$40 per share for the wide-moat computer-assisted design company. The shares are up 4% on results, leaving them fairly valued after a long stretch of trading in overvalued territory over the trailing 12 months, in our view. We reiterate our belief that Dassault Systemes is a moaty application software powerhouse; these results reflected promising operating leverage to come and strength in its software, especially as cloud subscriptions make up more of the revenue mix.

Dassault Systemes has a hold on the computer-assisted design software market for autos, aerospace and defense, and manufacturing. With 90% of all aircraft and 80% of all autos globally made via Dassault Systemes software, we believe the company will stay well entrenched in engineering teams with help from its significant switching costs and network effect found in its midmarket CAD software, SolidWorks. In our view, the wide-moat company has adapted well to new trends in its market exposures, such as electric vehicle design software, which has made us more confident in the longevity of its moat and ability to achieve excess returns on invested capital.

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.

Dassault Systemes has a hold on the computer-assisted design software market for autos, aerospace and defense, and manufacturing. With 90% of all aircraft and 80% of all autos globally made via Dassault Systemes software, we believe the company will stay well entrenched in engineering teams with help from its significant switching costs and network effect found in its midmarket CAD software, SolidWorks. In our view, the wide-moat company has adapted well to new trends in its market exposures, such as electric vehicle design software, which has made us more confident in the longevity of its moat and ability to achieve excess returns on invested capital.

Dassault Systemes recorded a nice beat in its third-quarter results, surpassing FactSet top- and bottom-line consensus. It showed growth all around, especially in its formerly hard-hit software licenses subsegment, which is recovering from pandemic-related weakness. Encouraged by strong results, the wide-moat company upped its non-IFRS expectations for the full year, confirming concerns from previous earnings calls this year that it was being too conservative on guidance. Nonetheless, our long-term forecast is relatively unchanged, leaving us reiterating our EUR 35/$41 fair value estimate for the computer-assisted design company. The shares are up 6% on the news to EUR 50, leaving them significantly overvalued after rising roughly 30% over the last six months.