Software Maker Endava (DAVA) Beats Estimates, Reiterated as a Top Idea at Citi

September 28, 2022 7:05 AM EDT
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Endava (NYSE: DAVA) reported earnings that came in ahead of market expectations, although its shares trade over 2% lower in London today.

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

For this quarter, the company sees EPS between £0.50 and £0.51, lower than the consensus of £0.54. Revenue is seen in the £191-193 million range, better than the consensus of £180 million.

For the full year, DAVA is calling for an adjusted EPS of £2.365 on sales of £845 million - midpoints of both ranges - while analysts were calling for £2.33 on revenue of £823.9 million.

"Endava's strong results for Q4FY2022 and for the full FY2022 are the result of continued solid demand for our digital acceleration services across all regions and verticals, despite headwinds from continued global macro uncertainty and volatility," said John Cotterell, Endava's CEO.

Citi analyst Ashwin Shirvaikar lowered the price target on DAVA to $110 per share from the prior $145 but remains positive amid “robust demand.” The analyst continues to see DAVA as one of the top IT Services ideas.

“The FY23 constant currency growth outlook likely came in below expectations but we still view this 23%-24% range as relatively solid given the macro uncertainty that has arisen since last earnings (last reported mid-May). Although the demand environment remains strong and Endava has not yet seen any negative impacts from the macro, it still included some macro conservatism in the outlook (particularly in fiscal 2H23 as visibility naturally decreases),” Shirvaikar told clients.

Morgan Stanley analyst James Faucette also cut the price target as he went to $95 from $130 on Overweight-rated DAVA shares.

“Despite minor signs of macro impact, demand appears durable with acceleration in spend at certain clients offsetting minor delays at others. We appreciate management’s prudent conservatism in its FY23 outlook and remain mindful of potential demand shifts as supply trends appear to be normalizing,” Faucette wrote.

By Senad Karaahmetovic

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