Aveva Group share price forecast: Will expenditure pay off?
First-half figures show heavy expenditure and reported losses, but confidence remains high
- How have Aveva shares fared recently?
- Pipeline: are more upgrades on the way?
- How does Aveva compare to the competition?
- Could Aveva stock be a good investment purchase?
Aveva’s first-half results, published on 10 November, outlined considerable net revenue gains yet substantial operating expenses following the Cambridge-based multinational’s acquisition of US software company OSIsoft.
The $5bn (£3.73bn) acquisition marks the largest corporate shake-up of the IT company since 2018, when French industrial group and majority shareholder Schneider Electric agreed to buy it for a £3bn price tag, following numerous unsuccessful attempts in previous years.
Reported revenue for the period totalled £480.9m, an impressive 44.6% year-on-year gain at face value, although this sum also integrates OSIsoft’s total business earnings for the H1 2022 period.
In reality, Aveva made pre-tax losses of £80.3m owing to the group’s merger activities, resulting in an earnings per share (EPS) negative of -27.07p. However, an interim dividend of 13p was declared, up 4.8% from last year.
With the above in mind, let’s see what else is in store for this London Stock Exchange-listed, FTSE 100 corporation. Could the Aveva Group share price news spell out a good investment opportunity? Read on as we delve into the Aveva Group share price forecast.
Despite reported losses, this could be a transformative moment for Aveva regardless of the short-term hit. Peter Herweck, chief executive officer, said: “Aveva achieved a good first-half performance, delivering a solid set of results and laying foundations for future growth. The integration of the Aveva and OSIsoft businesses has progressed well, with both cost and revenue synergies starting to materialise as planned.”
With the acquisition of OSIsoft, Aveva welcomed a strongly performing business under its wing. In fact, separating the two business lines shows a 15% growth throughout H1 for the former against Aveva’s more modest 6%.
Total operating expenses for the six-month period rose sharply year-on-year, coming in 39% higher at $448.5m. This was largely due to post-merger administrative costs, although research and development (R&D) expenses also remain high.
Current R&D projects seek to expand Aveva’s cloud business through heavy investment and expansion of the group’s software as a service (SaaS) platform AVEVA Connect. So while outgoings here are extensive, future-proofing the business may prove invaluable.
To tackle significant operating costs, Aveva plans to eradicate duplication in its office facilities, marketing and IT, according to the interim statement.
How have Aveva shares fared recently?
The AVV share price rose steadily in the first quarter, reaching an opening high of 4200p on 6 September. The only way to go was down, but although a subsequent dip was observed, the AVV share price rallied throughout October, reaching a high point of 3750p.
Shares opened at 3365p on 11 November and continued a modest upward trajectory throughout the day. Despite still having a while to go before reaching even October highs, Aveva’s overall stock price remains over 4% up on a yearly basis.
The moving average over the past 20 days is below the 50-day average. Although this could be painted in a negative light, the moving average over the past 100 days outperformed the 200-day average, making for better news.
Pipeline: are more upgrades on the way?
There is the potential for revenue deceleration to occur throughout H2. High operating and administrative costs are set to continue while the dust settles on the integration of OSIsoft.
Additionally, Aveva might be looking into further capital markets opportunities. Responding to a shareholder query on future strategy for transformative M&A projects, Herwick said: “We will continue to do collaborations and small bolt-ons as the opportunities come up in the market.
“When the time is right and we continue to prove that OSIsoft will be a solid integration for the shareholder benefit – as you can see in the EPS accretion already – we’ll make respective decisions,” he continued.
Given the substantial grounds for growth laid out during this six-month period, the proof might be in the 2023 pudding as opposed to shorter-term results when it comes to the Aveva Group share price.
How does Aveva compare to the competition?
Fellow British software multinational Sage Group is Aveva’s closest competitor on the LSE list. The Newcastle-headquartered company trails Aveva in terms of market capitalisation.
Revenues have essentially hovered around the £1.8bn–£1.9bn mark over the past three years and FT analysts predict that this trend will continue throughout the rest of 2021, going into 2022. Analysts expect a dividend payout of 18p for the upcoming fiscal year.
Flat sales growth gives way to a more negative share price forecast against Aveva, with the median estimate among 18 analysts offering negative 12-month price targets of -3.02%.
There is a higher Buy sentiment present among investors’ AVV stock forecast data, with the majority recommending that investors hold on to Sage Group shares at this point in time.
Could Aveva stock be a good investment purchase?
AVV share price sentiment among experts is positive. Polling 15 analysts, the Financial Times predicts a 4800p high and a 3800p low, equalling a median estimate of 4500p. Even the most modest of estimates suggests a high probability of gains for shareholders.
Dividends of 38p for the upcoming financial year are predicted, an increase of 5.57% on a yearly comparison.
Among 11 analysts, consensus revenue estimates equate to £1.23bn for 2022, climbing to £1.34bn the year after.
Five FT analysts propose a Buy strategy to capitalise upon the predicted upward trend, and seven analysts predict shares to outperform. Three suggest holding for the moment and zero experts recommend disposing of shares at this point.
Is Aveva Group a good share to buy?
It could be, according to analysts. Buy sentiment is generally high among experts, if a little cautious. Aveva is in a fairly good position to capitalise on its recent M&A activity, although operational costs remain a burden. However, there are many factors to consider before placing a stake in any company. Do your due diligence first!
Will Aveva Group shares go up?
Most analysts agree that they will. FT predicts a 4800p high and a 3800p low, equaling a median estimate of 4500p. Even the most modest of estimates suggests a high probability of gains for shareholders. Remember, though, that predictions can always turn out to be wrong.
Should I buy Aveva group shares?
That depends on whether you believe Aveva’s recent M&A activity and R&D outlay will pay off. It could well do in the medium term, but as always, thorough research is recommended before putting your capital at risk.