Berenberg lowers target price on Avast
Analysts at Berenberg lowered their target price on software firm Avast from 680.0p to 550.0p on Wednesday but said they still think the group's fundamentals "remain sound".
Berenberg believes that most investors would agree that Avast's current share price implies a broken deal with NortonLifeLock after the decision by the UK regulator to refer the takeover to a phase-two investigation.
The German bank said it finds this decision surprising and not necessarily forward-looking. However, it also agrees that it is now anyone's guess if the deal will be completed.
"Considering this, we update our numbers following the FY 2021 results and the recent Q1 2022 trading update," said the analysts. "Despite the lowered FY 2022 guidance, we think Avast's fundamentals remain sound with industry-leading EBITDA margins."
Berenberg said the group will probably have to invest more than it has before into sales, marketing, and R&D in order to counter aggressive competition. But even so, the analysts noted that if the Norton deal were to be pulled, after a short-term drop in the share price, they think it will find support at roughly 440.0p.
"Our one-year price target, however, is 550.0p (ie on the assumption that the deal does not happen), given the attractive underlying economics of the business and a return to mid-to high-single digit-growth from FY 2023 onwards," said Berenberg, which stood by its 'buy' rating on the stock.