On Thursday, Berenberg issued a significant revision of Compugroup Medical SE's (COP:GR) shares target, reducing it to €23.00 from the previous €46.00. Despite the substantial cut, the firm continues to recommend a Buy rating on the stock.
The adjustment follows a stark profit warning from CompuGroup Medical earlier in the week, which took the market by surprise due to the severity of the forecasted shortfall and the management's lackluster justification.
The analyst at Berenberg pointed out that the market had braced itself for a challenging 2024 after CompuGroup Medical revealed a mixed full-year outlook and disappointing first-quarter results.
However, the extent of the profit warning suggested deeper issues within the company. The analyst emphasized the need for CompuGroup Medical to overhaul its cost structures, product and service offerings, and to rebuild the credibility of its management team. These changes might necessitate bringing in new personnel for key management and board positions.
The report also mentioned the possibility of CompuGroup Medical benefiting from the involvement of a strategic or financial investor, which could aid in the company's much-needed repositioning. In light of these challenges, Berenberg has revised its earnings estimates for the company for the years 2024 to 2026 downward by 16-28%.
Despite the lowered forecasts and reduced price target, Berenberg's stance on CompuGroup Medical remains positive. The analyst acknowledged the company's valuable customer base, which includes doctors, pharmacies, and hospitals across Europe. Additionally, the firm cited CompuGroup Medical's historically low valuation multiples as a factor in maintaining the Buy recommendation.
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