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On Wednesday, Bernstein SocGen Group initiated coverage on Sopra Steria Group (SOP:FP) (OTC: SPSAF), assigning the stock an Outperform rating and setting a price target of €231.00. The research firm’s analyst pointed to several factors contributing to the positive outlook for the company, including its ability to grow at least in line with the addressable market, a strong business mix, and relative pricing power.
The analyst highlighted that Sopra Steria’s management has provided specific guidance for the first quarter of 2025, a move that is not common for the company, indicating a de-risking strategy. Additionally, the analyst noted that the stock’s valuation multiples are near historical lows, suggesting an opportune time for investors to consider purchasing shares.
Sopra Steria’s current trading multiples are considered depressed, with an EV/25e EBIT multiple of 6.6x and a 25e free cash flow yield of 9.4%. Bernstein’s risk/reward analysis suggests a considerably positive skew to the upside. The firm sees a potential 50% upside to their 12-month price target and estimates only a 10% downside in a bear case scenario. In a bull case, the stock price could more than double.
The analyst identified three short-term catalysts that could impact Sopra Steria’s stock performance. These include the dissipation of OSG headwinds from the second quarter of 2025, a potential increase in contract signings backed by a solid pipeline of commercial opportunities, and the extension of major contracts in the UK before their end dates.
In conclusion, Bernstein’s analysis forecasts that the news flow over the next six to twelve months could present a revaluation opportunity for investors regarding Sopra Steria’s stock. The firm’s analysis and guidance suggest a favorable outlook for the company’s financial performance and stock valuation in the near future.
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