Subdued Q3 earnings in software & IT, but stocks cheap - Barclays

TeamViewer SE

03/10/2023 07:56

** Barclays sees limited earnings upside for European
software and IT services in Q3 as the macro environment remains
challenging, though low stock prices increase valuation support 
    ** While it expects a tough sales environment to impact
earnings, it notes the euro has weakened during the quarter,
providing a "modest buffer" to consensus
    ** The broker says share prices in the sector have been
impacted by rising long-term yields as well as negative
read-across from U.S. results
    ** "We expect this set-up will favour names where management
teams can already speak to a FY24 growth improvement, while
names with an uncertain outlook might continue to struggle," it
says
    ** Barclays upgrades Swedish industrial technology group
Hexagon  HEXAb.ST  to "equal weight" from "underweight" as it no
longer sees the company as overvalued despite a weaker outlook
for earnings growth
    ** It upgrades German construction software developer
Nemetschek  NEKG.DE  to "equal weight" from "underweight",
saying expected growth acceleration in Q4 and a more resilient
market offers a "balanced risk-reward"
    ** The broker sees estimate upside into numbers for Sage
 SGE.L , TeamViewer  TMV.DE  and Temenos  TEMN.S 
    ** It remains cautious on Dassault  DAST.PA , seeing limited
upside given its high valuation, and on SAP  SAPG.DE , as it
expects pressure to increase on the cloud guidance

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