Berenberg lowers target price on Softcat

Berenberg stated that after years of "impressive growth", driven by a supercycle of digital transformation, IT resellers now face "more uncertain times".

The German bank noted that Softcat's peers had delivered "mixed results" year-to-date as it grapples with the return of costs and "slightly lower" sales growth.

Berenberg admitted that with all UK and EU resellers delivering lower cash conversion as receivables and inventories grow, it was easy to see why the sector has experienced a sell-off.

"But there are nuances between the different players," said Berenberg. "All, however, are likely to take market share from what is currently a highly fragmented market, and come out stronger the other side."

Berenberg, which made mid-single-digit increases to its estimates for Softcat, reckons that with the stock trading at a roughly 20% discount to its seven-year historical price-to-earnings ratio, now could be "an interesting time" to 'buy' as investor nervousness sits at such a high level.

Reporting by Iain Gilbert at Sharecast.com