Berenberg lowers target price on 'long-term winner' Computacenter

Berenberg stated that after "many years of outperformance", both on earnings and share price, Computacenter has now begun to "lag its relevant peers and indices".

The German bank highlighted that the stock was now down by 35% year-to-date - worse than the FTSE 250 at 22%, the European Technology Index at 29%, and both Softcat and Bytes at 30%.

"While this stock was a preferred name for us at the beginning of the year, it is clear that investors are discounting the shares more heavily for its lower growth profile than some peers and its weaker cash generation in the first half of the year," said Berenberg.

However, Berenberg thinks there were still reasons to be optimistic and that investors with a long investment horizon could generate "significant returns". Berenberg also reiterated its 'buy' rating on the stock.

"In its Q322 trading update, Computacenter guided that profitability in its next financial year (FY23E) may be affected as the group makes investments in focus areas of its IT roadmap. While this should allow for the top line to grow at stronger rates in the long term, it does dent our short-term forecasts," said the analysts.

"We bring our estimates down to be within 1% of consensus. While there is still a chance the business will grow PBT next year, given it has a track record of growing market share and profits in recessionary periods, for now we are taking a prudent stance and forecast a very modest dip. Nevertheless, we think this cost investment is the right move for the long term and that Computacenter will emerge stronger."

Reporting by Iain Gilbert at Sharecast.com