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Micro Focus boosted by Goldman Sachs upgrade to ‘buy’ from ‘neutral’ following recent trading update

The US investment bank's analysts said: “An in-line FY18 trading update suggests that revenue declines are moderating and sell-side estimates have likely bottomed”
Micro Focus office
Goldman Sachs also raised its 12-month target price for Micros Focus to 1,700p, up from 1,300p previously

Goldman Sachs gave a lift to blue-chip software firm Micro Focus International PLC (LON:MCRO) on Wednesday, upgrading its rating to ‘buy’ from ‘neutral’ following the group’s recent trading update.

The US investment bank also raised its 12-month target price to 1,700p, up from 1,300p previously, with Micro Focus shares trading at 1,427.50p in mid-afternoon trading, up 9.2% on Tuesday’s closing price.

READ: Micro Focus raises revenue guidance for year just ended

In a note to clients, Goldman’s analysts said: “Following a period of significant M&A execution issues which led to turbulent sales growth in FY18, we believe that the dust is starting to settle at Micro Focus.”

They added: “An in-line FY18 trading update suggests that revenue declines are moderating and sell-side estimates have likely bottomed.”

The analysts concluded: “In our view, cost synergies from the integration of HPE Software, and ongoing and future capital returns, should come to  the fore with the stock trading at a near term trough multiple of 7.5x 2019E PF EPS and revenue declines not deteriorating further.”

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