Citi has downgraded Softcat PLC (LSE:SCT), the IT infrastructure reseller, to neutral from buy while lifting its price target to £19.50, arguing that a share price surge of more than 50% since mid-March has left the stock's positive outlook fully reflected in the valuation.
The note, written by analysts Carl Murdock-Smith and Balajee Tirupati, acknowledges that Softcat has continued to execute well and has benefited from a structural increase in enterprise spending on information technology.
Looking ahead, the bank sees the group as well-positioned to sustain above-average growth as clients accelerate investment in the infrastructure layer needed to become AI-ready.
However, Citi argues that the re-rating since the first-half results leaves limited scope for meaningful earnings surprises or further valuation expansion.
Higher comparable figures from the prior year, potential macro headwinds and supply constraints are cited as factors that could weigh on growth momentum.
The bank concludes that while Softcat remains a high-quality operator, the current share price adequately reflects that quality, leaving the risk-reward less compelling than it was earlier in the year.
