Shore Capital upgrades Softcat back to 'buy' after recent declines

Shore Capital has moved its rating for Softcat back to a 'buy', just two weeks after downgrading the stock, following a big share-price decline at the IT infrastructure group.

Since cutting the stock to 'hold' on 25 June, the stock has dropped 13% and now lies 21% below Shore Capital's fair-value estimate of 1,950p – a decline which the broker called "overdone".

"Softcat has shown remarkable consistency in meeting or beating market expectations (never had a profits warning since IPO in 2015)," Shore Capital said.

The broker pointed out that Softcat has had an "excellent track record of growth", a consistently growing customer base, continued market share gains, and strong execution on customer service, value-for-money and employee engagement. It also has a proven "land-and-expand" ability to upsell to existing customers.

Meanwhile, AI has the potential to grow the business further, according to Shore Capital.

"The impact of AI is building rapidly, and in addition to the licensing of AI-enabled applications from Microsoft (e.g., Copilot) and others, Softcat’s customers will need to think about where they are hosted and the devices they are deployed upon. While it is still early days, Softcat is already beginning to see potential for an 'all-encompassing' impact across both infrastructure and applications, starting to build this year."

Softcat's shares were up 0.2% at 1,624p by 0841 BST.