Dassault Systemes shares slump on reduced licence target

French software maker Dassault Systemes shares dropped 4% on Wednesday, erasing Tuesday’s gains, as investors reacted to reduced licence growth expectations in its third-quarter results.

The company, which sells software for carmakers, planemakers and industrial companies, raised its full-year earnings and revenue forecast, due in part to the stronger dollar, after reporting higher-than-expected quarterly results.

However, it lowered its 2022 objective for licences and other software revenue growth on a non-IFRS basis at constant currencies to between 5% and 7% from 9% to 11% previously.

Jefferies deemed the publication an “underlying disappointment, with licences falling short of expectations”.

The company’s third quarter software revenue growth came in at 8%, the lower end of its guidance, but licenses and other software revenue declined 2% year on year, the brokerage noted.

“We see this as a reminder of the cyclical risks at Dassault, which makes the extent of the current valuation premium hard to justify,” Jefferies added.

The company reported total revenue of 1.37 billion euros ($1.36 billion) in the third quarter, up 8% on the year in constant currencies and above analysts’ forecast of 1.33 billion euros in a company-provided poll.

Revenue was driven by strong subscription and support growth.

Dassault Systems increased its non-IFRS diluted earnings per share target for 2022 to between 1.12 and 1.14 euro from its earlier estimate of 1.08 euro and 1.10 euro.

The company also raised its full-year revenue target to between 5.61 billion and 5.65 billion euros from a range of 5.49 billion to 5.54 billion euros previously, boosted by a strong dollar.

On Tuesday Dassault Systemes shares gained 4.2%.

At 1015 GMT on Wednesday the company’s shares were down 4.3%, extending a year-to-date drop to 33%.

($1 = 1.0047 euros)