On Monday, Goldman Sachs initiated coverage on Ingram Micro (NYSE: INGM) stock with a positive outlook, assigning a Buy rating and setting a price target of $33.00.
The firm outlined Ingram Micro's role as a significant IT solutions provider, distributing a wide array of products, including hardware, software, and cloud-based solutions. The company's extensive portfolio boasts over 220,000 unique stock-keeping units (SKUs) from more than 1,500 vendors.
Ingram Micro's global reach is reflected in its revenue mix, with 38% coming from North America, 30% from EMEA (Europe, Middle East, and Africa), 24% from APAC (Asia-Pacific), and 8% from Latin America in 2023. Goldman Sachs anticipates that the company's revenue growth will align with the overall global IT spending trends.
Moreover, the firm expects margin expansion for Ingram Micro, driven by operating leverage, automation investments in distribution centers, and the implementation of its digital xVantage platform.
The financial institution also highlighted Ingram Micro's capability to meet its target of over 30% free cash flow conversion, which is expected to support the company's capital allocation strategies. These strategies include engaging in tuck-in mergers and acquisitions (M&A) and providing annual dividends to shareholders.
Goldman Sachs believes that the current valuation of Ingram Micro at approximately 7.5 times next twelve months' (NTM) price-to-earnings (P/E) is attractive.
This valuation accounts for factors such as the sponsor supply overhang, a slightly less favorable free cash flow (FCF) profile compared to competitor Synnex (NYSE: SNX), and uncertainties surrounding the timing of IT spending recovery.
InvestingPro Insights
Adding to Goldman Sachs' positive outlook on Ingram Micro (NYSE: INGM), recent data from InvestingPro provides further context to the company's financial position and market performance. Despite the stock taking a significant hit over the last week, with a 7.56% decline in price total return, Ingram Micro maintains a market capitalization of $5.34 billion. This recent dip might present an opportunity for investors, aligning with Goldman Sachs' Buy rating.
InvestingPro data shows that Ingram Micro is trading at a P/E ratio of 14.96, which is relatively low compared to the broader market. This valuation metric supports Goldman Sachs' view that the company's current valuation is attractive. Additionally, Ingram Micro's price-to-book ratio stands at 1.48, further indicating potential undervaluation.
An InvestingPro Tip highlights that Ingram Micro is a prominent player in the Electronic Equipment, Instruments & Components industry, reinforcing Goldman Sachs' assessment of the company's significant role in IT solutions distribution. Another InvestingPro Tip notes that the company has been profitable over the last twelve months, which aligns with Goldman Sachs' expectations for margin expansion and free cash flow conversion.
For investors seeking more comprehensive analysis, InvestingPro offers 6 additional tips that could provide deeper insights into Ingram Micro's financial health and market position.
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