On Tuesday, Deutsche Bank initiated coverage on Gartner Inc (NYSE:IT) stock, a leading research and advisory company, with a Hold rating and a price target of $507.00. The firm highlighted Gartner's potential in an under-penetrated market, particularly emphasizing its strong brand within the Technology sector.
Gartner's addressable market is substantial, with a total addressable market (TAM) estimated at $200 billion, and $45 billion specific to Technology. The company's current revenues from technology-related services account for a mere 0.01% of the global IT spending, which stands at $5 trillion. Despite the small percentage, Deutsche Bank sees a medium-term growth target of over 12% in Contract Value (CV) for Gartner.
The company's growth in CV has recently underperformed its targets, but Deutsche Bank anticipates a re-acceleration in 2024. However, the timeline for Gartner to return to its growth target of over 12% remains uncertain amid tech sector budget recalibrations.
Deutsche Bank justifies Gartner's high valuation by pointing to its strong free cash flow (FCF) conversion and the fact that 75% of the company's revenues are generated from recurring subscription models. This financial stability is a key factor in the firm's Hold rating.
InvestingPro Insights
In light of Deutsche Bank's analysis, Gartner Inc's (NYSE:IT) financial metrics and market performance provide additional context for investors. The company's market capitalization stands at $36.15 billion, reflecting its significant presence in the industry. With a Price/Earnings (P/E) ratio of 41.53 and an adjusted P/E ratio for the last twelve months as of Q4 2023 at 45.5, Gartner trades at a high earnings multiple, indicating that investors may expect continued growth and profitability. However, this comes with a high Price/Book multiple of 53.12, suggesting the stock may be valued richly in terms of its net asset value.
InvestingPro Tips highlight that Gartner has been trading near its 52-week high, with the price at 96.98% of this peak. This could signal confidence among investors or, alternatively, a need for caution if the market adjusts. The company has also shown a solid revenue growth of 7.87% in the last twelve months as of Q4 2023, coupled with a gross profit margin of 67.78%, underpinning its strong market position and efficient operations.
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