On Wednesday, Berenberg adjusted its price target on Sopra Steria Group (SOP:FP) (OTC: SPSAF) stock, lowering it to €232 from €238. The firm maintained its Buy rating.
This change follows the completion of the sale of the Sopra Banking Software (SBS) business to Axway on September 2, 2024. The transaction is significant for Sopra Steria, as it resulted in a substantial cash inflow exceeding €410 million, enhancing the company's financial flexibility.
The first half of 2024 saw Sopra Steria experiencing a notable slowdown in organic growth, at just 0.3%, which led to a profit warning. Despite this, Berenberg remains positive about the company's prospects. The analyst cited the successful initial steps taken by Sopra Steria to overhaul its operating model, which include the roll-out of Sopra Steria Next and the expansion of skill centers.
The firm's decision to remain bullish on Sopra Steria's shares is also influenced by the company's low valuation multiples. However, adjustments to free cash flow (FCF) estimates were necessary, prompting the reduction in the price target. The sale of the SBS business is seen as a strategic move that could help Sopra Steria improve its operational performance going forward.
The company's efforts to revamp its business approach and the recent cash injection are expected to contribute to its future growth. Berenberg's updated price target reflects a careful consideration of these factors, balancing the recent operational challenges with the positive developments and potential for improvement.
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