Computacenter PLC (LON:CCC) has been initiated at ‘buy’ and a target price of 2,008p by analysts at Citi as they revaluated their views on a number of software and interactive entertainment resellers.
In a note on Monday, the bank said the value added resellers (VARs) were “an attractive way to gain exposure to IT spending trends”.
READ: Computacenter receives boost from upsurge in working from home during coronavirus pandemic
However, Softcat PCL (LON:SCT) was knocked to ‘sell’ and had its target price cut to 957p from 1,050p, with Citi’s analysts saying their long-term expectations were “misaligned”.
The bank said if it reverse engineered perpetuity gross margin growth assumptions, they predicted long-term growth of 0.8% for Computacenter and 4.4% for Softcat, although they thought 2.5% was most appropriate for the firm.
Citi also said short-term expectations were also out of line, saying that if they applied 2.5% long term growth to the stocks current prices implied a compound annual growth rate (CAGR) in gross profits for the next ten years of 1.7% for Computacenter and 12.6% for Softcat, compared to their own estimates of 3.5% and 8.3% respectively.
Shares in Computacenter were 0.5% higher at 1,664p in mid-morning trading, while Softcat shares dipped 0.7% to 1,128p.