Shares of Dassault Systèmes (FR:DSY) plunged 10% after the French software company announced its fourth-quarter results and a weak outlook for 2024. The company expects its 2024 revenue in the range of €6.350 to €6.425 billion, lagging analysts’ consensus estimate of €6.48 billion. Softness in the company’s Life Sciences software product line due to persistent slowdown in clinical starts has been weighing on the top-line performance.
Meanwhile, Dassault expects its 2024 EPS growth to be between 7% and 10%. DSY shares have risen nearly 13% over the past year.
Dassault Systèmes’ Performance
Dassault Systèmes’ Q4 2023 revenue increased 4% year-over-year to €1.64 billion. However, EPS remained flat at €0.25, as higher revenue was offset by lower operating margin. For the full year, the company’s revenue increased 5% to €5.95 billion while EPS grew 12% to €0.79.
Dassault gained from its transition to a subscription model, with subscription revenue growing 22% and 16% in Q4 FY23 and FY23, respectively. Further, the company highlighted that despite the COVID-19 pandemic and geopolitical uncertainty, it delivered non-IFRS EPS of €1.20 in FY23, successfully achieving the target set for 2018-2023. The company has now established a new plan to double its EPS by 2028.
Overall, Dassault expects to gain from continued focus on growth in core industries, including Transportation & Mobility, Aerospace & Defense, and Home & Lifestyle.
Is Dassault Systèmes a Good Stock to Buy?
Following the Q4 print, Jefferies analyst Alex Hoa Nguyen reiterated a Sell rating on DSY shares with a price target of €31 (28.5% downside potential). The analyst questioned the company’s premium valuation, given the weak cash flow and “underwhelming” outlook.
Analysts are cautiously optimistic about DSY stock, with a Moderate Buy consensus rating based on four Buys, two Holds, and one Sell rating. The Dassault Systèmes share price target of €45.50 implies a modest upside potential of 5% from current levels.
