Endava (DAVA – Research Report), the Technology sector company, was revisited by a Wall Street analyst today. Analyst James Faucette from Morgan Stanley downgraded the rating on the stock to a Hold and gave it a $80.00 price target.
Geoff Meacham has given his Hold rating due to a combination of factors regarding Endava’s current market position and industry trends. The company’s stock valuation, at 24 times its projected CY25 earnings per share (EPS), appears to already factor in anticipated large deal flows in the latter half of the fiscal year 2024. This projection is supported by the company’s strategic underutilization of its bench in preparation for these expected deals. Despite these prospective deals potentially resolving the issue of an underused bench, the near-term forecast suggests that gross margins might face pressure, aligning with the management’s commentary and reflecting cautious IT spending intentions revealed in a recent CIO survey.
Endava’s industry-specific performance shows a mixed picture, with certain sectors like Insurance and Mobility displaying relative strength amidst an overall challenging environment marked by softness in Payments and Banking. This is notable given that Payments and the Technology, Media, and Telecommunications (TMT) sectors, which are exhibiting weakness, collectively account for half of Endava’s revenue. While the management’s efforts to diversify through mergers and acquisitions are acknowledged, the need to watch these weaker sectors persists, particularly as clients may tighten their spending in response to economic conditions.
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Based on the recent corporate insider activity of 19 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of DAVA in relation to earlier this year.
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Endava (DAVA) Company Description:
Endava Plc engages in the provision of technology services. It focuses on finance, insurance, telecommunications, media, and retail companies. The company was founded by John Edward Cotterell in 2000 and is headquartered in London, the United Kingdom.
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