RBC Capital Raises Price Target on CDW (CDW) to $50; Reiterates Outperform

October 11, 2016 7:44 AM EDT
Get Alerts CDW Hot Sheet
Price: $44.30 +0.45%

Rating Summary:
    8 Buy, 2 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 14 | Down: 11 | New: 8
Trade CDW Now!
Join SI Premium – FREE

Get instant alerts when news breaks on your stocks. Claim your 2-week free trial to StreetInsider Premium here.

RBC Capital reiterated an Outperform rating on CDW Corporation (NASDAQ: CDW), and raised the price target to $50.00 (from $48.00). The main forces behind CDW’s performance are its scale, specialists, and compensation structure. RBC believes that the company’s operating margins should expand as the company remains focused on shifting toward higher-margin solutions business to achieve a balanced revenue portfolio.

Analyst Amit Daryanani commented, "We think that fundamentally CDW should continue being re-rated higher over the next several years as the company continues to execute on its share gain opportunity, dilutes the cloud threat, deploys a larger portion of FCF for capital allocation, and enables mid-teens total shareholder return. To look at the valuation upside, we analyzed CDW’s valuation pre-2007 LBO when the stock traded at a healthy absolute and relative valuation vs. where it's currently trading. While the current valuation of ~13x PE is ~35% below the 5-year average CDW traded at prior to going private, we think there are certain factors that explain the severe delta in valuation today: slower growth (IT spend more cyclical today vs. 10–12 years ago); a more leveraged balance sheet today; and lack of cloud concerns. We do think that CDW, provided the execution remains solid, should at minimum approach a S&P500 valuation (~16–17x PE) vs. currently trading at a ~20% discount (pre-LBO traded at 24% premium). Assuming CDW moves toward a market multiple, the stock should work toward ~$60; if the company were to approach its pre-LBO valuation, we could see the stock exceed $65. We maintain our Outperform rating and increase our price target to $50 from $48."

For an analyst ratings summary and ratings history on CDW Corporation click here. For more ratings news on CDW Corporation click here.

Shares of CDW Corporation closed at $44.99 yesterday.

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In

Related Categories

Analyst Comments, Analyst EPS Change, Analyst PT Change

Related Entities

RBC Capital, Standard & Poor's

Add Your Comment