DAVA: Generative AI Partnerships Will Support Future Recovery Despite Guidance Reset

Analysts have reduced their price target on Endava, cutting it by approximately $3 to reflect missed growth guidance, persistent pressure on the outlook, and a more challenging setup for a near term recovery in client demand and pipeline conversion.

Analyst Commentary

Bullish Takeaways

• Bullish analysts see the reset in growth expectations and price targets as potentially de-risking the valuation, limiting downside if execution stabilizes from here.
• Some investors may view the Hold and Market Perform stances as a signal that, while upside is capped near term, the fundamental story is not broken and could re-rate with clearer signs of demand recovery.
• The lower price target incorporates weaker pipeline conversion and client credit issues, which may allow for positive estimate revisions if management executes even modestly above the revised bar.

Bearish Takeaways

• Bearish analysts highlight that repeated misses versus growth guidance undermine confidence in management’s ability to forecast and deliver, warranting a lower valuation multiple.
• Expectations that shares will remain in the penalty box near term reflect concerns that a recovery in client demand and pipeline conversion could take longer than previously anticipated.
• The downgrade in rating and cut in price target underscore a more challenging setup for growth, with limited near term catalysts to drive a meaningful re-rating.
• Ongoing pressure in the company’s outlook, tied to client credit issues and softer performance, raises questions about execution risk and the durability of Endava’s growth profile.

What's in the News

• Endava launched Dava.Rise, a new programme connecting high potential scale ups with global enterprises to accelerate innovation, offering mentorship, technical guidance, and go to market support while helping corporates adopt emerging technologies faster (company announcement).
• Endava entered a multi year strategic partnership with Paysafe to deliver smarter payments and next generation community engagement, combining Endava’s engineering and AI capabilities with Paysafe’s global payments expertise under joint governance oversight (company announcement).
• TRD U.S.A. expanded its multi year partnership with Endava, naming the firm Official IT Consulting Partner from 2026 and extending Endava’s presence into IMSA, with a focus on AI enabled accelerators to modernize TRD systems and enhance on track performance (company announcement).
• Endava issued second quarter 2026 guidance calling for revenue of £179 million to £182 million, implying an 8.0 percent to 7.0 percent constant currency decline year over year, and full year 2026 revenue of £735 million to £752 million, a 4.5 percent to 2.5 percent decline versus the prior year (company guidance).

Valuation Changes

• Fair Value has fallen significantly, moving from 13.77 to 10.72, indicating a materially lower intrinsic value estimate.
• Discount Rate has edged down slightly, from 13.01 percent to 12.89 percent, reflecting a marginally lower perceived risk profile or cost of capital.
• Revenue Growth assumptions are effectively unchanged, remaining at approximately 1.76 percent, suggesting no material shift in top line growth expectations.
• Net Profit Margin assumptions are essentially flat, holding at around 3.29 percent, implying stable long term profitability expectations.
• Future P/E has fallen significantly, from about 24.1x to 18.5x, pointing to a notable de rating in the multiple investors are expected to pay for future earnings.