Tech Data (TECD) reported better-than-expected results for the third quarter, beating the Zacks Consensus Estimates. Moreover, the company gave encouraging revenue guidance for the upcoming quarter. We expect revenue to rebound modestly in fiscal 2011.
The company’s balance sheet remains strong. With healthy earnings momentum, continued cost-cutting initiatives, diversified customer base, significant operating leverage, gross margin improvement, strong fundamentals and an improving IT spending environment, we remain positive on the company’s growth prospects.
However, intense competition and weak industry pricing remain concerns. With more positives than negatives, we upgrade the stock to Outperform, and the company’s current premium valuation remains justified. We set a six-month price target of $50.00.Zacks Investment Research
