Credit Suisse slashes Aveva target by 19% after profit warning

15th Sep 2014 09:22

Credit Suisse has slashed its target price for Aveva by nearly a fifth after a profit warning from the engineering software firm last week.The bank has cut its target for the shares by 19% from 2,100p to 1,700p and kept a 'neutral' stance.Aveva announced on Friday that first-half revenues would be in the range of £84m-90m, compared with Credit Suisse's forecast of £101m, as a result of adverse currency movements, delays in contract renewals, weaker demand in places and disruption from a reorganisaction of its sales force.Credit Suisse analyst Charles Brennan said that it appears that weaker end markets have "finally taken their toll" on the company."It feels like AVEVA has defied gravity for a while, reporting in-line results against a backdrop of weaker news from the oil and gas sector," he said.Looking into the second half, the analyst said that Aveva now has limited visibility and the non-renewal of some rental contracts "throws into question the robustnes of 'recurring' revenues".Nevertheless, he said: "Aveva is still a good company and we think it will continue to command a premium valuation to reflect strategic value and the fact that 15% of the market cap is in net cash."The shares, which dropped 25% on Friday, were down a further 3% at 1,572p by 10:10 on Monday.