Bytes Technology Group PLC (LSE:BYIT, FRA:9NY, JSE:BYI) received a less favourable call from JP Morgan on Monday, as the bank initiated coverage with an 'underweight' rating and named peer Computacenter PLC (LSE:CCC) its top pick in the European value-added reseller (VAR) sector.
Shares in Bytes tumbled 2% to 414.40 on Monday, while Computacenter ticked higher to 5,615p, moves that came as JP Morgan set its 'underweight' rating on Bytes and reiterated an 'overweight (OW)' stance on Computacenter.
Diving into the rationale, the note said JPMorgan preferred VARs with stronger exposure to AI monetisation, particularly those more geared toward hyperscale capital expenditure.
On that basis, Computacenter was identified as its most preferred name in the subsector.
Turning to the downgrade, JP Morgan said Bytes had relatively limited tangible AI exposure, with hardware accounting for less than 10% of its gross profit.
Broadening the scope, the broker said its VAR note addressed investor questions on AI monetisation, the threat of disintermediation, changes to vendor incentives and related topics.
JP Morgan said those limited hardware and AI exposures, plus recent changes in vendor incentives, create risk to consensus earnings estimates for Bytes.
Looking beyond immediate forecasts, the note also considered the risk of vendor disintermediation in the subsector, a theme that could pressure intermediaries that struggle to demonstrate strategic value.
