European tech is 'fertile hunting ground' for investors, Berenberg says

New Work SE

11/07/2023 08:13

** Berenberg says it's a good time to "delve deeper into the
treasure trove" of mid-cap European technology stocks as
U.S.-listed tech shares look comparatively stretched
    ** It says the relative valuations, with an 85% premium on
EU tech to global equity markets, have created a "fertile
environment" for bottom-up stock picking in European software,
IT services, semiconductors and technology hardware
    ** Semiconductor stocks benefit from investor excitement
about the burgeoning AI market despite challenging earnings
environment, the broker says
    ** Average multiples across IT services trade near five-year
lows due to concerns about cyclical slowdown, potential
disruption from AI proliferation, and the risk of margin
compression, it says
    ** It expects greater hardware availability, normalising
inventory levels, inflation and rising travel costs to be margin
headwinds for IT resellers
    ** Service companies remain exposed to margin compression
from wage inflation, but less so to hardware price pressure, it
adds
    ** Berenberg upgrades IT services provider GFT Technologies
 GFTG.DE  to "buy" from "hold", citing consolidation effects,
M&A opportunities and high demand from banking customers
    ** It downgrades IT firm Cancom  COKG.DE  and software group
New Work  NWOn.DE  to "hold" from "buy"
    ** Cancom is down 2.5% by 0712 GMT; GFT rises 5.2%

 (Reporting by Anna Mackenzie)
 ((Anna.mackenzie@thomsonreuters.com))