CentralNic Group PLC (AIM:CNIC), Computacenter PLC, Darktrace PLC (LSE:DARK), Future PLC (LSE:FUTR), Next Fifteen Communications Group PLC and Team17 Group PLC (AIM:TM17) are Berenberg's UK mid-cap top picks for 2022 in the technology, media and telecoms sector.
The least preferred in the sector are FD Technologies PLC (AIM:FDP), 4imprint Group Plc (AQSE:FOUR) and Kape Technologies PLC (LSE:KAPE).
CentralNic, a provider of products and solutions that help businesses create an online presence, protect their brand names and carry out marketing activities, is liked by the investment bank's TMT analysts for its high revenue visibility, . The share price has risen by circa 60% over the past six months but analysts "think this is just the start" as M&A coupled with organic catalysts potentially resulting in the stock scaling new highs in 2022. "Moreover, compared to peers, valuations are rather cheap for a company which has managed a c20% organic growth CAGR over the past two years." A 230p price target represents another 60% upside.
Computacenter had another strong year in 2021, with its shares rising by 30% on the back of a 30% uplift to consensus profit forecasts. With the shares having nearly trebled in the past three years alone, Berenberg said the answer is "yes" to the two questions investors should be asking, namely can the earnings continue to outperform market expectations?; and can the shares rate to a higher multiple? "Cash will also be returned to shareholders in some way or other in 2022, further elevating the returns on offer." The price target is 3,600p.
Darktrace has a target of 1,000p after Berenberg has conducted a survey over the past few months with businesses that have trialled, used or currently use Darktrace’s products. "Not only did our survey show that customers were satisfied with the products, but the majority of these firms said they anticipate spending more with Darktrace too." This was backed up by the recent trading update showed second-quarter customer acquisition and upselling was better than expected, alongside declining customer churn. "Darktrace’s shares have clearly been caught in a web of misinformation, which we think the trading update and our survey will serve to break."
Future shares more than doubled in 2021 but "remain cheap" at 22 times 2022 forecast earnings, the analysts said. "In our view, Future’s growth outlook remains as attractive as ever with its large high-intent audience base and first-party data platform continuing to grow in value." A bull thesis even points to 20-80% upside to current estimates out to 2024.
Next Fifteen, which has a target of 1,500p), upgraded its EPS estimates for the year to January 2022 more than 30% last year, which, alongside a highly successful strategic transition, led to the shares climbing by 135%. "The shares, however, remain cheap on only 19x one-year forward P/E and, in our view, the scope for upgrades has only increased given the divergence between NFC’s improving organic and inorganic growth opportunities and consensus expectations," Berenberg said.
Team17, the computer games designer and publisher, was a top pick two years ago and its share price doubled. "After a one-year hiatus from our list (given sector dynamics rather than business fundamentals), it is back – and back with a vengeance." Off the back of a trading update that revealed last year was “above management expectations”, bucking the trend of many peers, two acquisitions and an evolving business structure make the analysts "increasingly optimistic" about the company’s outlook. A price target of 1,000p compared to Tuesday's close at 775p.
As for the least preferred, FD Technologies, is a 'sell' as it "is a classic case of valuation being unsupported by business fundamentals", as investors "overestimate the growth opportunity" of the company’s platforms which both have "a chequered record of operating in difficult competitive landscapes".
4imprint, a 'hold' at a 2700p share price target, has along with the rest of the promotional industry experienced a recovery in demand, but Berenberg is cautious about supply-chain-related disruption, "which we believe will continue to weigh on gross margins for longer than the market currently expects".
Kape Technologies, also a 'hold with a 410p target, the B2C cybersecurity company has been "quite successful" in consolidating its underpenetrated and growing market, but there are several concerns, including high customer acquisition costs and the potential for its Webselenese acquisition to backfire "due to conflicts of interest" when consumers realise that its review websites are now owned by Kape.