Deutsche Bank has reshuffled its ratings across the UK software and IT services sector, upgrading Bytes Technology Group PLC (LSE:BYIT, FRA:9NY, JSE:BYI) and Cerillion PLC (AIM:CER) to 'buy' while cutting Softcat PLC (LSE:SCT) to 'hold'.
Analyst Tintin Stormont lifted the price target on Bytes, the software reseller, to 500p from 410p.
Cerillion, which supplies billing and customer management software to telecoms operators, was upgraded to buy despite a reduction in its target to 1400p from 1575p.
Softcat, the IT infrastructure reseller, was moved down to hold, though the bank raised its target to 2140p from 1800p, implying it sees the share price as having run ahead of the fundamentals.
The changes come in a note weighing the risks facing the sector in the second half of the year.
The sector has performed strongly over the past three months and now sits slightly above where it started the year.
It is around 42% above the low it reached in late March.
Deutsche Bank said much of that recovery was accounted for by Computacenter, Softcat and Kainos, all of which delivered earnings upgrades.
More recently, the bank pointed to improved investor sentiment as the market reassesses how much of a threat artificial intelligence poses to what are seen as traditional business models in software and IT services.
That perception has swung repeatedly through the year, with software companies initially marked down on fears that AI tools would erode demand for conventional licensing and services work.
The rebound suggests investors are now less convinced of that disruption, at least in the near term.
Resellers such as Bytes and Softcat sit slightly apart from that debate, earning margin on distributing third-party software rather than developing their own.
