On Friday, IONOS, a company listed as IOS:GY, saw its shares target increased by Deutsche Bank (ETR:DBKGn) to EUR32.00, up from the previous target of EUR27.00. The firm has maintained its Buy rating on the stock.
The upgrade comes despite recent news that Amazon (NASDAQ:AMZN) is planning to expand its Cloud Solutions business in Germany, a move that could intensify competition in the cloud services sector.
The analyst from Deutsche Bank highlighted that IONOS is expected to continue its upward trajectory in the cloud market, citing two main reasons. Firstly, the difference in customer base between IONOS and Amazon's cloud services is significant. Secondly, IONOS has a robust pipeline of upcoming projects, including a potentially substantial contract with the German Federal Authorities.
Cloud Solutions currently represents a modest portion of IONOS's revenue, contributing approximately 10% in 2023. However, the analyst pointed out that the company's larger and more profitable segment, which includes Web Presence and Productivity services, continues to be the main driver of growth and margin expansion. This segment operates on a subscription basis, providing a steady revenue stream for the company.
The decision to raise the price target follows a review of the company's performance after the first quarter. The analyst believes that the strengths of IONOS's business model, especially the emphasis on subscription-based services, warrant a higher valuation and should be more fully recognized by the market.
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