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CDW Corporation (CDW), situated in Vernon Hills, Illinois, is a top provider of technology solutions to business, government, education, and healthcare sectors. With a market cap of $23.6 billion, CDW offers a wide range of hardware, software, and integrated IT services, empowering organizations to succeed in the digital age.
Shares of CDW have significantly underperformed the broader market over the last year. The stock has plunged 17.8% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 31.8%. In 2024, the stock has declined 22.3%, compared to SPX's 25.8% gains on a YTD basis.
Narrowing the focus, CDW also lagged behind the Technology Select Sector SPDR Fund's (XLK) 25.6% gains over the past 52 weeks and 20.3% return on a YTD basis.
CDW Corporation has lagged the broader market over the past year due to challenges in its hardware solutions segment, including prolonged sales cycles, macroeconomic uncertainties, and increased competition. These factors, particularly a 12% decline in government sales within the public sector, have weighed on its performance.
On Oct. 30, CDW stock dipped 11.3% after the company announced its mixed third-quarter results. Its adjusted EPS of $2.63 and revenue of $5.5 billion fell short of Street forecasts. Despite maintaining a stable gross margin of 21.8%, both non-GAAP operating income and non-GAAP net income per share saw a decrease of 4% and 3%, respectively. Further, The company's outlook for the remainder of 2024 anticipates flat U.S. IT market conditions and a low single-digit decline in gross profit.
For the current fiscal year, ending in December, analysts expect CDW’s EPS to decline 5.8% to $8.99 on a diluted basis. The company's earnings surprise history is mixed. It missed the consensus estimate in three of the last four quarters while beating the forecast on another occasion.
Among the 12 analysts covering CDW stock, the consensus rating is a “Moderate Buy.” That’s based on six “Strong Buy” ratings, one “Moderate Buy,” and five “Holds.”
This configuration is more bullish than a month ago, with five analysts suggesting a “Strong Buy.”
On Nov. 15, Redburn-Atlantic initiated coverage on CDW Corporation with a “Buy” rating and a price target of $230. The firm highlighted CDW's strong product positioning and growth potential in the underpenetrated UK market as key drivers for its positive outlook. Despite some short-term weakness, Redburn-Atlantic sees this as temporary and expects CDW to benefit as discretionary spending recovers.
The firm believes CDW's solid product lineup and market presence will lead to future earnings upgrades and a potential rerating. The target price reflects confidence in CDW's growth and market-leading position.
The mean price target of $227.64 represents a 28.8% premium compared to CDW’s current price levels. The Street-high price target of $250 suggests an upside potential of 41.4%.
