ValueAct's Morfit sees Insight Enterprises stock surging as cloud computing grows

Insight Enterprises

18/10/2022 22:23

By Svea Herbst-Bayliss
       NEW YORK, Oct 18 (Reuters) - Insight Enterprises Inc
 NSIT.O , which helps clients with the critical but largely
unsung work of digital transformation, is poised for a dramatic
stock price jump as its revenue stream becomes more predictable,
investment firm ValueAct's chief executive said.
    Mason Morfit, the firm's chief executive and chief
investment officer, said the company's stock price, currently
trading at $87.63, could climb to as high as $500 a share in the
next five years.
     "We find companies that have the opportunity to transform
into global champions by becoming better aligned with the mega
trends in the economy, whether that's cloud computing, streaming
television, or medical technologies, and the list goes on and
on," Morfit said during a presentation at the 13D Monitor
Active-Passive Investor Summit.     
    The company has a healthy business and works in the growing
cloud computing segment, two factors that should help
distinguish it, he said, adding that Insight trades around 10
times earnings and generates a 9% free cash flow yield with
growth in the high teens. This "presents a great return
opportunity without any multiple expansion," he said. 
    ValueAct, which traditionally owns roughly a dozen companies
and distinguishes itself from other activists by preferring to
stay behind the scenes, rarely presents its investment ideas
publicly. Morfit said he was speaking out about Insight because
it is broadly overlooked by the market.
    It is not widely covered by Wall Street analysts and has
been lumped with companies like DXC Technology  DXC.N  rather
than Accenture Plc  ACN.F  which is a more appropriate peer, he
said.
    As Insight helps transform its partner companies, it is also
transforming itself having hired a new chief executive earlier
this year and having changed the bulk of senior management.
    For ValueAct, betting on the megatrend of digital
transformation started when Morfit had a board seat at Microsoft
 MSFT.O  years ago. 
    While conventional wisdom might have suggested that
companies like Insight could wither in the shadow of giants like
Microsoft, this has not been the case as even Microsoft has
sought partners with this specialized expertise, he said. There
is a "huge opportunity for the vendors to have partners that can
make their services come alive."
 (Reporting by Svea Herbst-Bayliss; Editing by Lisa Shumaker)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))