Challenging Outlook for Dassault Systemes: Sell Rating Amid Weaker-than-Expected Revenue Growth and Margin Pressures

Dassault Systemes (0HB4 – Research Report), the Technology sector company, was revisited by a Wall Street analyst today. Analyst Charles Brennan from Jefferies maintained a Sell rating on the stock and has a €31.00 price target.

Charles Brennan has given his Sell rating due to a combination of factors impacting Dassault Systemes. The company’s first-quarter results were weaker than expected, with revenue growth at 4%, falling short of the consensus estimate of 5%. Additionally, the guidance for the second quarter also indicates a lower-than-expected revenue growth of 5%, compared to the consensus of 7%. These figures suggest that the company’s transaction business model may face challenges, warranting a potential de-rating.
Furthermore, the mix of revenue growth highlights some concerns, with software revenue growth at 5%, which is at the midpoint of the expected range, and a significant shortfall in license revenue, which declined by 10% against a guidance of around 5%. Service revenue also missed expectations, and EBIT was below consensus. Looking ahead, the guidance for the first half of the year suggests a modest growth of approximately 5%, with unchanged full-year guidance implying a challenging second half. The margin guidance has been slightly reduced to accommodate additional investments, although EPS remains unchanged due to favorable foreign exchange assumptions.