Canaccord Genuity lowers target price on Aptitude, says 'buy the dip'

Canaccord Genuity said Aptitude's January trading update indicated that full-year trading was in line with consensus and added that Tuesday's release confirmed it had made "a solid finish" to the year.

Despite the "sluggish macro", the analysts said Aptitude's outlook suggested confidence in accelerating annual recurring revenue growth by roughly 10% and delivering margin expansion in 2023.

"This is backed by several new logo wins across the product portfolio in the first months of the year as well as a good pipeline. We also note that the £51.6m end-2022 ARR covers 90% of our 2023 software revenue forecast," said Canaccord Genuity.

The Canadian bank also stated operating margins should benefit from a tailing off in research and development for the firm's new Fynapse platform.

"Overall, after a year of high investments, our forecasts assume 8% sales and 6% cost CAGRs driving 100-200 bps annual margin expansion. This should translate into top quartile 22% annual EPS growth over the next three years," said the analysts.

Reporting by Iain Gilbert at Sharecast.com