Dassault Systèmes downgraded CAC 40: Jefferies – 6.16.2022 at 16:16

(AOF) – Dassault Systèmes is relegated to last place in the CAC 40 index and fell 2.07% to 38.75 euros due to a reduction in Jefferies’ recommendation. The broker switched from Hold to Underperform, while the target price was reduced to 33 euros from the original 40 euros. Long-term tensions – with a 10-year yield that returned above 3% in the United States yesterday, are also burdening technology stocks.

The consulting company thinks the technology group lags behind industry trends in cloud / Saas software and considers it unlikely that it will organically meet its 2025 target in this area. In this horizon, Dassault Systèmes focuses on a third of its software turnover in the cloud, compared to 20% in 2021. Jefferies expects only 26%.

For analysts, Dassault Systèmes will solve this problem through acquisitions. Raising around € 500 million from SaaS revenue is cheaper today than it was 6 months ago, but still estimates it could cost around € 4.5 billion.

“The acquisition of cloud capabilities has led to lower valuations elsewhere in the industry and Dassault is likely to suffer the same fate,” warns Jefferies.

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Key points

– Software publishing company founded in 1981;

– Turnover of EUR 4.5 billion, generated by 37% in Europe, 38% in the Americas and 25% in Asia;

– Activity divided between industrial innovation for 51%, mainstream innovation for 21%, life sciences for 18% and services for 10%;

– Business model based on the 3DEXPERIENCE virtual platform of several software useful for customers in search of sustainable innovations harmonizing product, nature and life with 3 key sectors – manufacturing industry, life sciences and health and infrastructure and cities;

– Capital controlled by 40.39% (54.45% of voting rights) by the Dassault family, 6% (8.06%) by Charles Edelsten, Chairman of the 12-member Board of Directors, and 1.62% (2.07%) by Bernard Charlès, Chief Executive Officer;

– Balance sheet, debt fell to EUR 2.7 billion and cash EUR 2.14 billion.

Challenges

– Human Industry Experience strategy aimed at strengthening leadership in manufacturing, infrastructures and cities, then life and health sciences: – capitalization of the group’s 13 main brands – Enovia, 3DExcite, Centric PLM for collaboration applications, SolidWorks, Catia, Geovia, Biovia for 3D modeling, 3DVia, Delmia, Simulia for simulations and Netvibes, Exalead, Medidata for information intelligence and a new 3D experience works for SMEs

– Offer focused on 11 economic sectors and 12 geographical areas;

– a financial target of 13% annual earnings per share growth for the years 2020 to 2024, ie EUR 6;

– R&D-supported innovation strategy of € 935 million with 12 technology portfolios;

– “Sustainability Compass” environmental strategy based on 3DEXPERIENCE Platform for Sustainability with 4 main commitments: 38% reduction in CO2 emissions per employee in 2025 (compared to 2018) – carbon neutrality for 2050 – 2/3 new licenses with a positive impact on the environment – federation of stakeholders;

– Activity visibility, repetitive software turnover generating 8/10 of revenue.

Challenges

– Growth of the cloud-based subsidiary 3DS Outscale, SecNumCloud, certified for the public sector in France and strengthened by the acquisition of NuoDB;

– Spin-off from the “virtual twins” synchronization program between the actual products and the data processed in the virtual products.

Software publishers: multiple acquisitions in healthcare

According to market research firm IDC, the healthcare industry is expected to spend more than $ 15 billion on software and cloud servers by 2023. Following Microsoft’s acquisition of Nuance, which combines voice recognition and telemedicine, for $ 16 billion, it is Oracle’s turn to make the largest acquisition in its history by acquiring Cerner, the number two medical software distribution company in the United States. The amount of this cash operation is $ 28.3 billion. Cerner, which had revenue of $ 5.5 billion in 2021, could enable Oracle to strengthen its cloud position as the U.S. group seeks to grow like its major rivals such as Google, Microsoft or Amazon.

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