Analyst Note| Julie Bhusal Sharma |
Dassault Systèmes reported strong fourth-quarter results that came in at the high end and above management’s guidance. Dassault continues to undergo a transition to a subscription model from a license-based approach. Nonetheless, the company is determined not to sacrifice growth as a result of the change. Today, the company has more than 20% of revenue related to cloud offerings, and is aiming for this to grow to a third by 2025--which we think is doable--and key to margin expansion going forward. We are increasing our fair value estimate for the wide-moat computer-assisted design company to EUR 156 ($187) per share from EUR 140 ($165), due to our confidence in Dassault’s potential in areas like the life sciences. Still, shares are overvalued, in our view, implying investors wait for a more favorable entry point.