Goldman Sachs sees macro risks mounting for European tech

SIMCORP A/S

20/07/2022 12:26

** Golman Sachs sees risks from slowing economic growth,
inflation, and declining consumer spending and e-commerce
building up for European technology firms into 2023
    ** While GS has not yet seen large-scale warnings in its
coverage, it sees risks around lengthening software sales
cycles, pausing discretionary projects, and slowdowns in more
cyclical end-markets
    ** "Some larger-cap companies in our industry coverage are
already preparing to manage and flex costs into H2 2022 to
protect margins, and in IT Services we have observed a slowing
of hiring," the broker says
    ** However, it says well-positioned companies can benefit
from digitalisation trends that should allow them to offset the
macro issues to some extent and increase market share
    ** Those with strong balance sheets should also be able to
benefit through strategic M&A, it adds
    ** Consumer spending and e-commerce slowdown poses the main
risk for payment and financial tech, though it's offset by
inflation tailwinds and structural factors such as the shift
away from cash, the broker says
    ** In IT services, groups with a higher digital mix and
offshore leverage should be more resilient, GS says
    ** It cuts French tech company OVHcloud  OVH.PA  and British
software group Micro Focus  MCRO.L  to "sell" from "neutral" and
Danish IT firm SimCorp  SIM.CO  to "neutral" from "buy"
    ** It raises British software company Sage  SGE.L  to
"neutral" from "sell"

 (Reporting by Diana Mandiá)
 ((diana.mandiaalvarez@thomsonreuters.com))