Barclays downgrades Spirent on valuation after stellar run in 2019
Analysts at Barclays Research downgraded their view on shares of Spirent from 'equalweight' to 'underweight', telling clients that the stock's valuation was "out of sync" with testing peers.
The broker's call followed a 112.0% run-up in the share price over the course of 2019, which easily outsripped the European technology sector's 35.0% jump and its peers' 75% jump.
Driving the price up were its leading positions in next-generation Ethernet testing and the 5G cycle, the analysts said, which had led to a 5.5% year-on-year increase in revenues, a pace not witnesses since 2014/15.
Yes, the company would continue to benefit from the longer 5G development and deployment cycle - but mostly in Wireline - and it would struggle to gain market share in Wireless versus the established players.
As well, restructuring had delivered stronger margins but those were already towards the upper end of the firm's medium-term guidance.
The analysts did up their target price from 159.0p to 190.0p but added "While we remain constructive on fundaments, we turn bearish on valuation with the recent rally leaving Spirent trading on all-time high multiples."