AVEVA hit by UBS downgrade as stock pulls back

28th May 2014 10:38

AVEVA's share price was pulling back on Wednesday after a surge the previous session as UBS downgraded its rating on the engineering software group from 'buy' to 'neutral'.The bank said that "notwithstanding management's evident confidence in the pipeline", the current valuation of the stock is now "full".In spite of the positive market reaction to the company's annual results on Tuesday - the shares finished 9% higher by the close - UBS said the figures were "mixed" with licence strength in Asia offsetting demand weakness in Latin America and Russia. It said the company was able to maintain strong margins but noted currency headwinds and the continued softness from the Enterprise Solutions division.UBS highlighted comments from Chief Executive Richard Longdon in a post-results interview with CNBC that he is keen to take part in further deals to expand its presence in North America/and or plant operations."Aveva's acquisitions record is solid, although the largest deal to-date was the £20m acquisition of 164-person Tribon (marine) in 2004. As such, if the group attempted a larger deal, execution risk would be something the market would likely focus on."The bank has trimmed its earnings forecasts for the company on the back of incremental currency headwinds and has in turn cut its target price for the stock from 2,550p to 2,500p. "Aveva remains on the UBS M&A WatchList as it is a potentially choice asset for a large industrial group interested in pursuing a digital industrialisation strategy. However, with our estimates slightly lowered and consensus likely to follow suit, we see the current valuation as full on a stand-alone basis."The stock was down 3.8% at 2,261p by 10:52.BC