New Trade for July 20th, 2023

The tech sector rebounded in the first half of 2023, adding an astonishing 41.2%, easily outpacing what was already considered a solid quarter of performance for the broader S&P 500 index (up 16.9%). But the lion’s share of that increase was due to the surging prices of a handful of the biggest names in the sector, resulting in a top-heavy market.

As such, short-term volatility among prominent tech stocks could be the beginning of a significant rebalancing away from big tech in the second half. Today we’re highlighting a compelling mid-cap up-and-comer that could be on the precipice of a substantial turnaround…

Endava PLC (DAVA) 

Endava (DAVA) is a compelling choice; It excels in helping other businesses modernize their technology for the sake of agility and relevance. With a remarkable track record, DAVA shows revenue growth of 32% from 2018 to 2022, driven by customer acquisitions and a retention rate of almost 90%. DAVA experienced a rapid increase in sales from its most prominent clients. While diversifying its customer base, DAVA is also pursuing a market opportunity that could be valued in the trillions by 2026. With significant further growth potential, DAVA presents itself as an enticing long-term prospect. 

DAVA is down year-to-date by 22.95% and is trading near the bottom of its 52-week range, leaving some room for an opportunity to “buy the dip.” Expected to report $188.5 million in sales at $0.45 per share for the current quarter, DAVA most recently beat analysts’ estimates on both EPS and revenue by margins of 10.98% and 0.98%, respectively. With TTM asset growth of 16.83%, DAVA also shows year-over-year growth in critical areas such as revenue (+20.28%), net income (+21.17%), EPS (+20%), and operating income (+18.44%). DAVA has $99.19 million in free cash flow and a modest 10-day average volume of around 327 thousand shares. From analysts, DAVA has an average price target of $72.50, with a high of $103.91 and a low of $55.77, suggesting an upside potential of over 76%. DAVA has six buy ratings and one hold rating. 

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Stansberry Research:

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