JPMorgan Raises Endava Stock Rating on Enhanced Risk/Reward Ratio –

JPMorgan Raises Endava Stock Rating on Enhanced Risk/Reward Ratio –

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On Tuesday, JPMorgan updated Endava PLC (NYSE:) stock from neutral to overweight, setting a price target of $49.00. This adjustment comes as the company recognizes a more attractive risk/reward profile, which has recently seen a significant decline following a lower guidance.

Endava shares currently trade at around 14 times expected 2024 adjusted EBITDA, compared to 19 times for peers EPAM and GLOB.

The JPMorgan analyst believes the company’s near-term forecast is realistic, especially at the low end, and suggests any indication of revenue stability or sequential growth could lead to a positive change in sentiment investors.

The issues Endava is currently facing are considered cyclical and the growth gap with its digital sector peers is expected to narrow or even disappear. This outlook is supported by customers’ continued digital transformation needs and Endava’s strong positioning in high-growth sectors like payments.

At a recent investor luncheon hosted by JPMorgan, discussions with Endava management provided additional insight. The leadership team, including CFO Mark Thurston, SVP of Catalyst Americas Vince Francis, and Head of IR and ESG Laurence Madsen, shared their perspectives on the company’s direction and strategy.

Endava’s focus on digital transformation services is particularly relevant as businesses across various industries continue to invest in digital capabilities to improve their operations and customer experience. The company’s expertise in areas such as payments is expected to play a crucial role in its growth trajectory.

The upgrade by JPMorgan reflects confidence in Endava’s potential to overcome its recent challenges and capitalize on the growing demand for digital transformation services. With the stock’s valuation now appearing more attractive, Endava could be positioned for a turnaround as it strives to meet its adjusted earnings targets and strengthen its market presence.

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