By Karol Badohal
GDANSK (Reuters) -French software maker Dassault Systemes' shares dropped more than 5% 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 constant currency basis to 5-7% from 9-11% previously.
Jefferies deemed the publication an "underlying disappointment, with licences falling short of expectations".
The company's third-quarter software revenue grew by 8%, at the lower end of its guidance, but licences 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 said.
The company reported total revenue of 1.37 billion euros ($1.36 billion) in the quarter, up 8% on the year in constant currencies and above analysts' forecast of 1.33 billion euros, driven by strong subscription and support growth.
"The bottom line of all of this, when you look at the total revenue mix, is that we accelerated the growth in subscription revenue, and this transition is well underway," CFO Rouven Bergmann said in a call.
"We are progressively increasing the share of recurring revenue while we continue to deliver the top-line revenue and profitability objectives despite the lower growth contribution from the licences," he added.
Dassault Systems increased its non-IFRS diluted earnings per share target for 2022 to 1.12-1.14 euro from 1.08-1.10 euro previously.
It also raised full-year revenue target to 5.61-5.65 billion euros.
The company's shares were down 5.1% at 1205 GMT, having gained 4.2% a day earlier.
The move also reflected big tech stocks' fall globally after grim results from Alphabet (NASDAQ:GOOGL) Inc and Microsoft Corp (NASDAQ:MSFT) stoked fears of a global economic downturn.
($1 = 1.0047 euros)