The potential synergies from the merger with Schneider Electric’s software arm are already banked into the AVEVA Group PLC (LON:AVV) share price, according to Citigroup.
The US banking giant has downgraded AVEVA to ‘neutral’ even though it has cranked up its target price to 2,140p.
The recent strong share price performance already implies 2% revenue and 2% cost synergies, Citi argues.
“Given the lack of quantification of synergies and longer-term strategy, we believe the market is including too much synergy value at this time,” Citi believes.
Citi has calculated pro forma accounts following the completion of the merger and admits these could be viewed as “potentially conservative”, with 2% revenue growth for Schneider and roughly 5% medium-term growth for Aveva.
“Should we see an improvement in the market conditions upside risk to our earnings estimates is likely, particularly Aveva,” Citi concluded.
The marriage of the two businesses took place at the beginning of March at the third attempt.
The French firm took a 60% stake in the British engineering software company, paying £500mln in cash for the shareholding.
Shares in AVEVA were 20p lower at 2,040p on Monday morning.