Gamma Communications PLC (LSE:GAMA) remains a 'buy', according to Deutsche Bank, which has repeated its recommendation and price target of 1,850p (current price: 998p).
The German bank sees “many reasons” to expect Gamma to show a return to growth in its core UK market, alongside a continued expansion in Germany.
"We believe GAMA is a high-quality company whose shares are very undervalued right now," said Deutsche analyst John Karidis.
Karidis, in a note, acknowledged concerns around Gamma’s UK gross profit which is expected to be flat in FY25 and FY26, after previous years of consistent growth. He notes that the UK accounts for around 80% of pro forma earnings (EBITDA), and points to fears that Gamma has gone "ex growth".
But, the Deutsche analyst disagrees. Instead, he reckons growth is set to resume during FY26.
This return to growth will be supported by the group’s positioning and opportunities to expand its product and service offering, Karidis claims.
Meanwhile, Gamma’s German operations, representing about 15% of pro forma earnings, are delivering strong double-digit growth, the broker highlighted, with momentum expected to continue.
Deutsche said that the combination of undervaluation, international expansion and scope for UK recovery supports a positive view of the shares.