Software maker Endava beats ratings, reaffirms it as Citi .’s best idea

Software maker Endava beats ratings, reaffirms it as Citi .’s best idea

Written by Sinad Karahimetovic

indava (NYSE:) reported earnings that came in ahead of market expectations, even though its shares were trading down more than 2% in London today.

Endava a Q4 EPS of £0.51, better than the analyst estimate of £0.49. Revenue for the quarter was £180.4 million, which is again better than the consensus estimate of £178.35 million.

This quarter, the company sees earnings per share of between £0.50 and £0.51, below the consensus of £0.54. Revenue is seen in the £191m – £193m range, better than the consensus of £180m.

For the full year, DAVA is claiming an EPS of £2,365 on sales of £845m – the midpoints of both ranges – while analysts are claiming £2.33m on revenue of £823.9m.

Endava CEO John Cotterell said: “Endava’s strong results for the fourth quarter of fiscal 2022 and the full year of fiscal 2022 are the result of continued strong demand for our digital acceleration services across all regions and sectors, despite headwinds from continued lack of global macro-volatility and certainty.

The Citi analyst cut the target price on DAVA to $110 per share from $145 previously but remained positive amid “strong demand.” The analyst continues to see DAVA as one of the best IT service ideas.

“The forecast for stable currency growth for fiscal year 23 is likely to be below expectations but we still see this 23%-24% range relatively strong given the overall uncertainty that has arisen since the last earnings (reported late mid-May). While the demand environment remains strong and Endava has yet to see any negative macro effects, it still includes some overall conservatism in the outlook (particularly in the second half of fiscal 2012 where visibility naturally declines), he told clients.

An analyst at Morgan Stanley also lowered his target price to $95 from $130 on over-rated DAVA shares.

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“Despite slight indications of the overall impact, demand appears resilient with an acceleration in spending in some clients offsetting minor delays in others. We appreciate management’s prudent conservativeness in its FY23 outlook and remain aware of potential demand shifts as it appears that supply trends normalize.

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