goldman sachs maintains buy rating on dassault systemes stock

Goldman Sachs reiterated its Buy rating on Dassault Systemes (DASTY) with a €42.00 price target, despite the company pushing back its target for doubling EPS to 2029 from 2028. While the delay implies a 15% CAGR for 2024-2029, surpassing consensus estimates, Goldman Sachs awaits further details on revenue, margin drivers, and M&A impacts to assess the growth trajectory, which is expected to accelerate in the latter half of the medium term. InvestingPro analysis suggests the stock is undervalued, trading near its 52-week low, and highlights Dassault Systemes' strong fundamentals, including an 83.57% gross profit margin and 29 years of consistent dividend payments.

Analysis

Goldman Sachs has reiterated its Buy rating and a €42.00 price target for Dassault Systemes SE, even as the company revised its timeline for doubling earnings per share (EPS) to 2029, a one-year pushback from the original 2028 target. Despite this adjustment, the company's new plan implies a robust compound annual growth rate (CAGR) of 15% for EPS between 2024-2029, significantly above the 9% consensus estimate from Goldman Sachs and Visible Alpha. For the 2025-2029 period, based on a consensus 2025 EPS of €1.36, the revised plan suggests a 17% CAGR, compared to a 10% consensus. Dassault Systemes, currently trading near its 52-week low at $37.15 and considered undervalued by InvestingPro analysis, maintains strong fundamentals evidenced by an 83.57% gross profit margin and a consistent dividend payment record spanning 29 years. The anticipated EPS growth is expected to be driven by gradual revenue increases, expansion of its 3D UNIV+RSES platform, and strategic capital allocations, including mergers and acquisitions. However, Goldman Sachs analysts anticipate further clarification from management regarding specific revenue and margin drivers, alongside the impact of M&A, noting that the current EPS guidance indicates growth will be more heavily weighted towards the latter part of the medium term.

Key Decisions for Investors

• Investors could consider the current valuation near the 52-week low and strong underlying fundamentals, supported by Goldman Sachs' Buy rating, as a potential opportunity, despite the revised EPS timeline.
• It is advisable to closely monitor communications from Dassault Systemes' upcoming Capital Markets Day for detailed insights into revenue generation, margin expansion strategies, and the expected contribution from mergers and acquisitions, which are critical for validating the projected growth.
• Portfolio managers should factor in the back-ended nature of the expected EPS growth, implying that patience may be required, as the most significant acceleration is anticipated in the later years leading up to the 2029 target.