CDW Corp. Outperforms After New ‘Buy’ Rating from UBS

CDW Corporation, a provider of technology products and services, experienced an increase in stock value after UBS initiated coverage with a Buy rating and a price target of $237, suggesting an upside potential of 18%.

Analysts anticipate that CDW will achieve an organic revenue compound annual growth rate (CAGR) of at least 6% over the next few years, alongside an EPS CAGR of a minimum of 10%. UBS also indicated the likelihood of the company seeking acquisitions or ramping up share buybacks.

The analysts stated, “By shifting towards more software and service-oriented offerings, we project CDW’s organic revenue CAGR to be at least 6% over the coming years, despite a slight decline in the current year. Additionally, the transition to higher-margin software and services in gross profit should provide operating leverage and lead to a minimum 10% EPS CAGR.”

They further noted, “CDW’s reduced leverage following the Sirius Computer acquisition and its robust free cash flow generation offer flexibility, positioning the company to pursue additional transactions aimed at accelerating growth or to allocate an additional $300-$400 million (1%-2%) for buybacks, which are not included in our EPS forecasts for the upcoming years.”

Following the Buy rating from UBS, CDW Corporation was one of the top performers on Tuesday, with shares rising by 1%, even as the S&P 500 index fell by 1.4%.