Berenberg raises Bytes Technology to 'buy'

(Sharecast News) - Bytes Technology won an upgrade from Berenberg on Friday, with the broker lifting its recommendation from 'hold' to 'buy' and raising its target price sharply from 360p to 520p after a strongerthanexpected firsthalf update and improved guidance.

Berenberg said Bytes delivered an "impressive" H127 performance, with gross invoiced income rising 19% year-on-year, well ahead of consensus, while gross profits grew 18%, also beating expectations, supported by demand across software, cloud and security. Operating profits increased 6%, ahead of the 1% consensus estimate, despite higher technology costs and normalised bonus levels.

The German bank said Bytes' upgraded FY27 guidance looked "more than achievable", with the firm now expecting lowtomidteens growth in gross profits versus its previous highsingledigit to lowdoubledigit range. Operating profit was now expected to grow in the lowtomid single digits rather than remain broadly flat.

Berenberg said the strong momentum was particularly reassuring given the disruption caused by changes to Bytes' corporate sales model and the headwind from Microsoft's incentivestructure changes. It raised its gross profit forecasts for FY27, FY28 and FY29 by 6%, 9% and 12%, respectively, and lifted operating profit forecasts by 7%, 10% and 15%.

The broker added that while several senior appointments were still awaited, Bytes had "regained momentum", prompting the upgrade to buy and the new target price.

Reporting by Iain Gilbert at Sharecast.com