SAP, ASML Holding and Dassault: Three technology companies that shine in the stock market

There is no doubt that the technology sector holds the future. Many companies in this sector are reducing their prices, which will affect pvaluations that pushed the indexes to all-time highs. And no, we are not talking about Big Tech or the nickname “Magnificent Seven”, we are in Europe and there are leading companies here too.

Semiconductor industry, still unknown, reserved and little understood by the public, especially in Europe; Today, it is becoming more visible, even coming into the media spotlight. “The COVID19 pandemic has exposed the economy’s dependence on the semiconductor sector and forced the industry to monopolize all views, including politics, raising sovereignty issues,” they say. Francisco Rodríguez d’Achille and Ivan Diez, partners and directors of Lonvia Capital.

True, semiconductor production is concentrated in Taiwan, home to the largest and most developed microelectronics ecosystem in the world, where TSMC is the only author capable of producing the world’s most advanced microcircuits in volume for prestigious customers. such as Nvidia or Apple, Europe has an important role to play and does not want to be left out. In fact, according to the experts of Lonvia Capital, “to increase its weight on the world stage, Europe has issued a €43 billion stimulus plan, most of which is intended to support manufacturers in their projects to build semiconductor factories.. These initiatives are already bearing fruit with the construction of plants such as Intel’s plant in Germany, which will be the largest semiconductor plant in Europe.”

A scenario in which hardware manufacturers such as ASML Holding as well as software companies such as SAP or Dassault Systemes play a very important role.

Holding ASML designs, manufactures and sells semiconductor manufacturing equipment. The company has a monopoly on the machinery needed to produce the advanced chips that will drive the current and future computing revolution, especially artificial intelligence. In the fourth quarter, the company registered very important orders for equipment worth about 9 billion euros. “This is due to the demand for more powerful and complex silicon chips, which require the most advanced lithographic equipment to produce, as well as the explosive demand for chips that can handle artificial intelligence (AI) applications,” he says. Mark Denham, Head of European Equities at Carmignac.

We believe this advantage gives it “pricing power, a high degree of growth visibility and the ability to generate attractive returns on capital.” Management has called 2024 a transition year that should turn into a successful 2025. Geopolitical tensions around China and the related “chip wars” are a cause for concern. However, the company’s current strategy should mitigate the worst-case scenario (total ban). More importantly, its valuation points to significant outperform thanks to projected growth and profitability,” he says. Ben Ritchie, head of developed equity markets abrdn.

The price is rising at more than 24% a year and, according to Reuters, In the last five years alone, it would have offered its shareholders a return of over 480%.. According to analysts’ average target price, the company could end its journey on the stock market with an average target price of 846.4 euros, which is in line with the price at which it is currently trading. Of the 34 analysts covering the stock, 25 recommend a “buy” or “strong buy” to the stock, compared to 8 who remain neutral, and only one recommends a “sell.”

Carmignac analysts say both SAP and Dassault Systemes produce software products that improve the productivity of their customers, “where we see strong steady growth in demand. In addition, all these companies have made great progress towards subscription software that allows them to see future revenues,” says the head of European equities.

SAP began the year by announcing a $2.2 billion restructuring program that will affect 8,000 jobs as part of an effort to focus on the development of business areas driven by artificial intelligence. And that’s it The company expects generative artificial intelligence to revolutionize its business and has committed to investing more than $1 billion to support technology startups. is working on artificial intelligence through its venture capital firm Sapphire Ventures.

Last quarter results show that SAP Cloud subscriptions grew by 25%, with a gross margin of 72.8%, which is already very close to the group’s margin of 74.8%. The cloud laggard, CCB, ended 2023 up 27%.

For 2024 SAP predicts cloud revenue growth of 24-27% to a maximum of €17 billion. “If cloud applications improve, the target of €21.5 billion in 2025 (required 23.5% CAGR) could even be exceeded,” says Nicolas López, director of equity analysis at Singular Bank. A value that increased next year’s profit and free cash flow forecasts by 500 million euros due to improvements in the efficiency of the transformation program. Cloud and software revenue forecast for 2024 is +9% to €29.25 billion. By 2025, Cloud revenue is expected to reach 21.5 billion euros, with group profitability of 10 billion euros.

The price is up more than 20% since the beginning of the year and everything seems to be in favor of further growth. In fact, the analyst consensus supports the target price at $175.34, which gives a potential upside of just over 4% from current prices.

Dassault Systemes is a software company based in France that offers various types of 3D solutions. Its structure is divided into three sectors: manufacturing, aerospace and defense, and life and health. Recently The company forecasts revenue growth of 8% to 10% in constant currency in 2024, after posting full-year earnings in line with expectations, thanks to strong subscription growth.

The group, which sells software to automakers, aircraft makers and industrial companies, expects full-year non-IFRS revenue of 6.35 billion to 6.43 billion euros ($6.86 billion to $6.95 billion) in 2024 after an increase of 9% last year.

The group, which remains unchanged this year, has a price target of €45.65, giving a potential of 3.6%.

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