On Monday, Nemetschek (NEM:GR), a software developer, received an upgrade in its stock rating from Barclays, moving from 'Equalweight' to 'Overweight'. Alongside the rating change, the firm also increased the price target for Nemetschek to €108.00, up from the previous target of €87.00. The upgrade reflects a positive outlook on the company's ongoing transition to a subscription-based model.
Barclays anticipates that Nemetschek's shift towards subscription services will become a significant positive factor by fiscal year 2025 (FY25), especially due to the completion of Bluebeam's subscription transition. This change is expected to contribute to over 20% growth in the Build segment, which focuses on construction software, from FY25 through FY28.
In the Design segment, challenges from Graphisoft's ongoing transition to subscription are projected to be nearly balanced out by gains from Vectorworks in FY25. Barclays forecasts that growth in this area will maintain a rate of approximately 8% in the near term and could accelerate to around 10% in later years.
Barclays' projections for Nemetschek are robust, with expectations of 15-17% organic growth across the group from FY25 to FY28. Additionally, the firm predicts an annual margin expansion of 130 basis points. The estimates provided by Barclays are 2-14% higher than the consensus for FY25 through FY28 EBITDA (earnings before interest, taxes, depreciation, and amortization).
This optimistic outlook is underpinned by the belief that the company's strategic shift will support higher growth rates in the coming years.
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