Analyst Note| Julie Bhusal Sharma |
Wide-moat Dassault Systemes’ second quarter was a dimensional one--with growth coming from more than just its 3D Experience cloud platform. The all-around strength led to an earnings beat, based on FactSet consensus--thanks to significant organic and inorganic growth. With management upping its guidance for the year after seeing robust demand for its software solutions, we’ve increased our forecast non-IFRS EPS for 2021 as well as long-term growth expectations, as we’re pleased by the long-term implications of this quarter. Consequently, we are increasing our fair value estimate for the computer-assisted design company to EUR 35 per share ($41 per U.S. share) from EUR 32 ($38). Shares are up 2% after the earnings report to EUR 45, leaving shares overvalued, in our view. As a reminder, Dassault’s stock has risen dramatically over the last six months, by just under 35%, which is well above the S&P 500’s growth of roughly 17% in the same period. However, we consider the dramatic boost in share price to be largely unfounded, given our forecasts for the company based on an already robust growing total addressable market in the years to come.