On Friday, Jefferies adjusted its outlook on Bytes Technology Group PLC (LON:BYIT:LN) shares, lowering the price target to GBP5.20 from GBP5.60, while keeping a Hold rating on the stock.
The firm cited several factors influencing this decision, including a lack of immediate positive catalysts that could drive the stock's performance in the short term. Additionally, the analyst pointed to a slower growth forecast for the second half of 2024 and increasing staff turnover as signs of ongoing challenges in the market.
The assessment noted that while earlier in the year there was considerable enthusiasm surrounding advancements in artificial intelligence, those expectations have now been delayed. This shift in sentiment is part of the reason for the revised price target.
The analyst also mentioned that despite a reasonable free cash flow (FCF) yield of 4-4.5%, the valuation does not present a sufficiently compelling opportunity, especially when compared to other UK technology companies.
Bytes Technology's market position was contrasted with peers such as Sage and Computacenter. The analyst highlighted that Sage's estimated calendar year 2025 FCF yield is around 4%, suggesting that Bytes Technology's current financial prospects may not be as attractive as those of some other companies in the sector.
The report further elaborated on the broader market conditions, indicating that Bytes Technology faces a challenging environment, with tougher end markets impacting the business. This tougher environment is reflected in the company's performance and outlook, which has led to the revised price target.
In summary, Jefferies' update on Bytes Technology Group PLC reflects cautiousness due to a combination of delayed industry expectations, slower growth projections, and staff attrition. These factors contribute to the firm's decision to maintain a Hold rating and reduce the price target for the company's shares.
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