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LivestreamMenuCDW stock is poised to bounce after underperforming its peers lately, presenting a buying opportunity for investors seeking to gain exposure to the enterprise server space, according to Morgan Stanley. The bank upgraded the hardware and software name to overweight from equal weight. It raised its price target on shares to $170 from $142, suggesting 38% upside from Monday’s close. Analyst Erik Woodring said “valuation remains compelling relative to peers.” CDW trades at 11 times forward earnings, according to FactSet. That’s well below the S & P 500’s 20.9 multiple and the Nasdaq-100’s 25 price to earnings ratio. Shares have fallen nearly 10% year to date, however, while the broader market trades around record levels. CDW .SPX YTD mountain CDW vs SPX year to date “CDW has been the clear laggard of the group, though we believe the ‘IT disruption’ thesis is overstated and positive estimate revisions and a return to operating leverage in [the second half of this year] should dispel this concern,” Woodring said. CDW shares have struggled due to concerns that rising inflation and widening artificial intelligence adoption could stymie its growth. The company has also experienced weakness in its software revenue, putting pressure on its profit margins. Despite those worries, more than 20% of the company’s revenue has come from stronger-than-expected demand for its servers, storage and networking, which could boost its stock, according to Woodring. CDW leadership has also pointed to double-digit earnings-per-share growth, he added. In addition, the firm announced in late May an incremental $1 billion share buyback plan, which should drive additional upside to shares, according to Morgan Stanley. Morgan Stanley’s call falls in line with consensus on the Street. Of the 12 analysts covering CDW, seven have a buy or strong buy on the stock, LSEG data shows.Read More
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