Berenberg ups Computacenter price target, reiterates 'buy'
Berenberg lifted Computacenter's price target to 1,850p from 1,450p on Friday as it reiterated its 'buy' stance on the stock following the unexpected trading update earlier this month.
Computacenter
2,572.00p
10:24 29/04/24
FTSE 250
19,899.93
10:25 29/04/24
FTSE 350
4,494.42
10:25 29/04/24
FTSE All-Share
4,447.45
10:25 29/04/24
Software & Computer Services
2,443.82
10:24 29/04/24
The bank noted that Computacenter said 2018 results would be ahead of expectations, adding that this followed Softcat’s profit upgrade just two days earlier, reaffirming the fact that UK and European IT infrastructure is performing exceptionally well.
"With upgrades to numbers of circa 6% across the board, our confidence is only building in our medium-term investment case," Berenberg said.
"Due to Computacenter’s consistent financial history, steady margins and strong cash generation we believe it should be valued with a discounted cash flow. We assume long-term EBIT margins of 2.9% and sales growth of 3.5% - deriving a valuation of 1,850p."
Berenberg said investors are focusing on the fact that Computacenter has low EBIT margins, but should instead focus on gross profit, i.e. the commission it makes on a given transaction rather than revenue. It pointed out that since 2005, there has not been a single year in which gross profit has fallen.
At 1450 BST, the shares were up 1% to 1,577.29p.