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Morgan Stanley ups Capita to 'equalweight'
Morgan Stanley upgraded outsourcer Capita to 'equalweight' from 'underweight' as it slashed the price target to 180p from 460p.
"The outlook for estimates remains opaque, with a strategic update expected later in the year. We continue to view Capita as a traditional business process outsourcing provider that is competitively challenged, which justifies a discount to its wider peers. But with the shares now up with events, we move to equalweight."
MS noted that Capita has guided to underlying pre-tax profit of £270-300m and the bank now forecasts £275m. This is around 30% below its and consensus numbers before the company's profit warning, while its 2018 pre-tax profit estimate is down around 40% since January 2017.
"Capita is a traditional BPO provider, offering labour arbitrage or to move a customer process into an existing process. The former can be significantly challenged by automation (RPA and cognitive), while the latter should show some benefit.
"We continue to believe that, like most sector peers, Capita needs to develop a co-ordinated strategy for digital transformation/automation. We suspect it is accelerating investment in this, but also expect the market place to be changing quickly."
At 1545 GMT, Capita shares were up 0.4% to 159.30p.
"The outlook for estimates remains opaque, with a strategic update expected later in the year. We continue to view Capita as a traditional business process outsourcing provider that is competitively challenged, which justifies a discount to its wider peers. But with the shares now up with events, we move to equalweight."
MS noted that Capita has guided to underlying pre-tax profit of £270-300m and the bank now forecasts £275m. This is around 30% below its and consensus numbers before the company's profit warning, while its 2018 pre-tax profit estimate is down around 40% since January 2017.
"Capita is a traditional BPO provider, offering labour arbitrage or to move a customer process into an existing process. The former can be significantly challenged by automation (RPA and cognitive), while the latter should show some benefit.
"We continue to believe that, like most sector peers, Capita needs to develop a co-ordinated strategy for digital transformation/automation. We suspect it is accelerating investment in this, but also expect the market place to be changing quickly."
At 1545 GMT, Capita shares were up 0.4% to 159.30p.
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