Citigroup downgrades Aveva to neutral, says valuation is up with events

21st May 2015 10:38

Citigroup downgraded its stance on Aveva to 'neutral' from 'buy' saying the valuation is up with events.While it continues to believe that Aveva is a high quality mid-cap name, Citi said that after the recent run - the shares are up 53% year-to-date - driven at least in part by ongoing bid speculation, the shares are trading at a significant premium to historic multiples."We highlight Aveva's share price and multiples have historically shown a strong correlation with the oil price. With Citi economists forecasting little recovery in oil prices ($75 per barrel by December 2016), we struggle with the recent move, and the resultant premium valuation and downgrade the stock," said Citi.It said the key to drive the shares further from here would be progress on a number of key strategic initiatives and a further recovery in end markets.Citi group said the business remains well placed for solid growth given its strong market positioning and uptake of its E3D software.Citi raised its target price on the stock to 2025p from 1745p as it introduces its long-term discounted cash flow growth assumptions.