Endava shares cut by Needham on mixed 2Q results
Investing.com | Editor Emilio Ghigini
Published Mar 01, 2024 08:54AM ET
On Friday, Endava PLC (NYSE:DAVA) experienced a revision in its stock price target, which was lowered to $50.00 from the previous $70.00, while Needham reaffirmed the Buy rating. The adjustment follows the company's mixed financial results for the second quarter of fiscal year 2024.
Endava reported revenue that did not meet expectations, but savings in selling, general, and administrative expenses (SG&A) and favorable items below the line contributed to a surpassing of bottom-line estimates.
Management's guidance for the third quarter came in below market consensus, leading to a significant reduction in the forecast for the full fiscal year 2024. This guidance update prompted a sharp decline in Endava's stock value, with a sell-off of over 40%. The underperformance in revenue has been attributed to delays in projects and slower conversion of the pipeline into actual revenue, especially in sectors like payments, banking, and financial services.
Despite the considerable reduction in the company's outlook and the resulting sell-off, the belief is that the market reaction may have been excessive. The sentiment is that Endava's shares now present a more attractive opportunity for long-term investors, with expectations that growth will pick up once the operating environment stabilizes.
The revised price target reflects a more cautious stance in light of the recent financial developments and market response. Endava's growth prospects remain a focal point, with anticipation of recovery and acceleration in the future. The company's efforts to leverage SG&A and manage below-the-line expenses have been noted as positive steps amidst the revenue challenges faced in the recent quarter.
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