Jefferies maintains Dassault Systèmes at Underperform after profit warning

Investing.com - The stock of software company Dassault Systemes SE (EPA:DAST) is showing the largest decline among the CAC 40 index values Tuesday, falling by more than 4% following a profit warning.

Noting that this is rather unusual for this company, Jefferies analysts believe that this surprise raises questions about the short-term outlook and future of the company.

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Jefferies thus maintained its "Underperform" recommendation for Dassault Systèmes, with a target price of EUR 30, which translates to a downside risk of 16% compared to last night's closing price.

Dassault Systèmes unexpectedly announced that its second-quarter results for fiscal year 2024 would be below expectations, with a shortfall of EUR 30 million in revenue due to delays in signing large transactions.

The new growth forecast for this quarter is about 4%, compared to an initial range of 7% to 9%. Jefferies pointed out that the lengthening of transaction durations makes contract sizes larger and less predictable, which can lead to variability in results.

The company also revised downward its forecasts for fiscal year 2024, now anticipating revenue growth of 7% at constant exchange rates, compared to an initial forecast of 9%. This revision implies a reduction of more than EUR 100 million in annual revenues, with 30 million attributed to the second quarter performance and 70 million to an anticipated decline in the second half of the year.

To achieve these new targets, Dassault Systèmes will need to achieve growth of 7% to 11% in the second half, calculated Jefferies analysts.

Finally, Jefferies analysts also indicated specific concerns about the performance of the Medidata and Solidworks software, which represent about 40% of the group's revenues and may not achieve double-digit growth, putting additional pressure on the rest of the business to compensate.

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