Berenberg downgrades Softcat after share price strength
Berenberg downgraded its recommendation on shares of IT infrastructure provider Softcat to ‘hold’ from ‘buy’ on Monday following a recent run higher in the share price that has left the stock trading at a 45% premium to its long-term historical levels and a "significant" premium to global peers.
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
Softcat
1,550.00p
16:40 19/04/24
Software & Computer Services
2,337.16
17:09 19/04/24
The bank noted that Softcat is now up 100% year-to-date after a "stellar" FY19 in which Berenberg upgraded estimates numerous times and the stock re-rated significantly.
"There is no doubt that Softcat has many avenues for substantial growth, as we highlighted in our 'poised to take market share' note in July, and we believe there is capacity for upgrades in the next 12 months," it said.
"However, we feel this is more than priced into the shares, as they now trade on circa 32x price-to-earnings and 25x EV/EBIT, which reflects premiums of circa 80% and circa 40% to, respectively, US and European IT infrastructure providers."
Berenberg said that at these levels, the positives are baked into the share price.
The bank kept its 1,100p price target on Softcat shares.
At 1020 GMT, the shares were down 1.5% at 1,143.47p.