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On Wednesday, JPMorgan updated its assessment of Softcat (LON:SCTS) Plc (SCT:LN), raising the company's price target from GBP13.50 to GBP14.50. The firm maintained its Underweight rating on the stock, indicating a cautious stance despite acknowledging the company's solid performance.
Softcat, an IT infrastructure provider, has demonstrated a strong earnings trajectory throughout 2024, outperforming many of its Value-Added Reseller (VAR) and IT Service peers. The company's resilience, especially given its exposure to the fluctuating UK technology market and small-to-medium business (SMB) customers, has surpassed JPMorgan's initial expectations for the year.
The financial year 2025 (FY25) guidance provided by Softcat was slightly below the sell-side consensus. However, JPMorgan believes that this guidance aligns more closely with the expectations of the buy-side, suggesting that the earnings forecast for FY25 is more attainable.
JPMorgan noted that Softcat's shares are trading at a significant premium compared to its peers. While acknowledging the company's quality and performance, the firm expressed caution due to the high valuation, suggesting that the risk/reward balance may not be as favorable for investors at the current price levels.
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