Berenberg upgrades Softcat to ‘buy’ from ‘hold’

Berenberg upgraded IT infrastructure and services provider Softcat on Friday to ‘buy’ from ‘hold’ and reiterated its 1,900p price target.

"With the shares now off 28% since highs, 200 basis points worse than our mid-cap TMT (technology, media and telecoms) universe, we think now is the time to look again," it said.

The bank said resellers are among its favoured stocks within its UK TMT coverage.

"Not only are they beneficiaries of investment in digital transformation, which is showing no signs of slowing down, but we think they are less exposed to current risk variables in the market, as we detailed in our latest TMT sector note.

"With peers all reporting strong results in recent weeks, we think Softcat’s revenue is likely tracking ahead of consensus FY22 run-rate forecasts."

Berenberg said operating costs are likely to have been lower in the first half too, given the Omicron wave.

"We therefore believe there is scope for outperformance at next week’s first-half results and if current market rates of growth can continue, we could possibly see significant upgrades in the second half too."

At 0945 GMT, the shares were up 4% at 1,695p.