On Monday, Morgan Stanley (NYSE:MS) initiated coverage on Ingram Micro (NYSE: INGM) stock, a major player in the global IT distribution market, with an Equalweight rating and a price target of $24.00.
The firm acknowledges the significant role Ingram Micro plays in the IT sector, which is valued at approximately $4 trillion, by connecting a vast array of IT vendors with a large customer base.
Ingram Micro, recognized as the second-largest IT distributor worldwide, is instrumental in the 2-tier channel model, facilitating the connection of over 1,500 IT vendors with more than 160,000 customers. A noteworthy 95% of these customers are small to mid-sized businesses (SMBs) or mid-market clients that lack the capability to independently consolidate products and solutions from multiple IT vendors. This service is increasingly vital in the complex technology environment of today.
Morgan Stanley highlighted Ingram Micro's potential for growth, given the expansive and fragmented nature of the global IT market. With projections indicating the market could reach $5 trillion by 2028 and experience consistent spending growth at a compound annual growth rate (CAGR) of 8% through the same year, Ingram Micro, which currently captures just 1.1% of global IT spend, has a considerable opportunity for expansion.
The firm also pointed out Ingram Micro's internal initiatives aimed at enhancing its cloud, software, and solutions offerings, as well as improving operational efficiencies to create greater competitive differentiation. These efforts are expected to contribute to increased net margins and free cash flow (FCF) conversion.
In conclusion, Morgan Stanley's outlook for Ingram Micro is positive, forecasting a 2.2% annual revenue growth, a 6% annual increase in EBITDA, and a 13% annual growth in earnings per share (EPS) through 2026. This growth trajectory is seen as an attractive prospect for a multi-year total return CAGR.
In other recent news, financial services company Stifel initiated coverage on Ingram Micro, setting a $28 target price and awarding a Buy rating. Stifel anticipates a resurgence in IT spending trends, potentially benefiting Ingram Micro's operating leverage. The firm's confidence is rooted in a valuation of approximately 8.6 times the projected earnings per share for fiscal year 2025.
Similarly, Redburn-Atlantic initiated coverage on Ingram Micro, issuing a Buy rating and setting a $30 price target. The firm anticipates double-digit earnings growth, balance sheet deleveraging, and increased free cash flow generation.
Jefferies, a global investment banking firm, also initiated coverage on Ingram Micro with a Buy rating and a $28 price target. The firm expects the company's growth to gain momentum from 2025 onwards due to the conclusion of Ingram Micro's investment cycle, which could lead to improved margins and free cash flow.
Moreover, Goldman Sachs (NYSE:GS) initiated coverage on Ingram Micro with a Buy rating and a $33 price target. The firm expects Ingram Micro's revenue growth to align with global IT spending trends and anticipates margin expansion driven by operating leverage, automation investments, and the implementation of its digital xVantage platform.
These recent developments indicate a positive outlook for Ingram Micro from multiple investment firms.
InvestingPro Insights
InvestingPro data and tips offer additional context to Morgan Stanley's analysis of Ingram Micro (NYSE: INGM). Despite the positive outlook from Morgan Stanley, recent market trends show some challenges. InvestingPro data reveals that Ingram Micro's stock has taken a significant hit over the last week, with a 1-week price total return of -7.56%. This short-term volatility aligns with an InvestingPro Tip indicating that the stock's RSI suggests it's in overbought territory.
However, it's important to note that Ingram Micro's financials show some strengths. The company's P/E ratio of 14.96 and Price to Book ratio of 1.48 suggest a relatively modest valuation, which could be attractive to value investors. This is further supported by an InvestingPro Tip highlighting that the stock is trading at a low revenue valuation multiple.
While Morgan Stanley projects growth for Ingram Micro, current InvestingPro data shows a slight revenue decline of -0.18% over the last twelve months. This may reflect the challenges in the broader IT market that Ingram Micro is navigating. Nevertheless, the company remains profitable, with a gross profit of $3.49 billion over the same period.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 8 more InvestingPro Tips available for Ingram Micro, which could provide valuable perspective on the company's market position and future prospects.
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