🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

Endava stock downgraded by Citi amid revised revenue forecast

EditorEmilio Ghigini
Published 03/01/2024, 05:48 AM
© Reuters.
DAVA
-

On Friday, Citi downgraded shares of Endava PLC (NYSE:DAVA), a global technology company, from Buy to Neutral. The firm also significantly reduced the price target for Endava's stock to $40 from the previous $90. This adjustment follows Endava's announcement of an approximate 9% reduction in their revenue expectations.

The downgrade was prompted by the realization that Endava's financial estimates were overly optimistic, as the company's recent performance did not meet these forecasts. Citi noted that past misses in expectations by Endava were due to unforeseeable events, such as activist-led cost cuts at a major client or repercussions from a forced merger involving a large bank. However, the current situation suggests that Endava's limited diversification, particularly its focus on the FinTech sector, which is currently facing challenges, is a significant concern.

Citi's analysis pointed out that while Endava is modifying its approach to providing financial outlooks, the firm still tends to have a positive bias. The recent acquisition of the India-based company GalaxE aims to address the issue of diversification but introduces new risks associated with mergers and acquisitions integration. Additionally, there is concern that client demands for lower price points, especially in markets like India, could lead to further unexpected negative outcomes.

The revised price target of $40 reflects both a reduction in expected financial performance and a lower confidence level in the company's ability to manage the risks mentioned. Citi's decision to downgrade Endava to Neutral from Buy is based on the need for a rebuild in confidence regarding the company's ability to mitigate these emerging risks.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.