CDW Corporation's UK Expansion Less Certain After Brexit

Barclays’ Mark Moskowitz believes the ability of CDW Corp CDW to use the Kelway acquisition to enter Europe has become less certain following the U.K.’s decision to exit the E.U. He maintained an Overweight rating on the company, with a price target of $47.

“As such, risk surrounding the CDW narrative is heightened until trade deals and other relationships between the U.K. and E.U are renegotiated,” the analyst mentioned.

In the near term, FX headwinds might pressure incremental contribution to the revenue during 1H from Kelway.

“However, CDW should continue to benefit from multi-national customer acquisitions in general as a result of CDW U.K. (Kelway),” Moskowitz stated.

Beyond Brexit

Beyond Brexit, the analyst expressed concern regarding the level of consolidation in the IT solutions market in Europe, where share gain could be more challenging for CDW that in North America.

“CDW has successfully gained share from smaller, regional distributers in North America but in a more consolidated European market the amount of low hanging fruit could be limited,” Moskowitz explained.

The analyst also believes the company’s guidance of CDW U.K.’s revenue contribution for 1H could be at risk due to the meaningful weakening of the pound against the dollar.