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BMO Capital Markets downgraded the software-enabled IT and cloud solutions provider, Converge Technology Solutions (OTCQX:CTSDF), considering that the macro-uncertainty and higher investments will lead to more time for a consistent attractive organic growth and margin expansion at the company.
The shares were trading ~4% down on Friday morning after market open.
The ratings agency lowered its rating on the IT company to Market Perform from Outperform and the price target to $4.50 from $7.50. The stock is currently trading at $2.25.
The management shifted the capital allocation priorities and strategic focus to organic growth and share buybacks from acquisitions.
The focus on organic business will take investment and time to demonstrate growth and margin expansion, and re-expand valuation multiples, according to BMO analyst Deepak Kaushal.
Also, challenging conditions in Europe and ongoing macro uncertainty in North America led to the agency to lower its organic growth forecast on the company.
The ratings action aligns with the Hold rating on the company by Seeking Alpha authors.
More on Converge Technology:
Converge Technology Solutions' Stock Wilts As We Await Special Committee