The market turned its nose up at the AGM trading update from Australia's number one specialist technology hardware distributor Dicker Data ((DDR)), sending the stock down almost -6% by the close of trade on Wednesday.
Analysts take a slightly more nuanced interpretation of the latest update on sales momentum, albeit both Goldman Sachs and Jarden have trimmed EPS estimates and target prices.
The nub of the problem for Dicker Data lays in the slower-than-expected recovery in demand and macro conditions impacting more than anticipated on small and medium-sized businesses across Australia.
For the calendar year-to-date, gross sales rose 17.4% due to a higher contribution from enterprise sales. This was actually better-than-expected following 10% growth in the previous period and 8.3% growth in 1H25.
Jarden emphasises the result was also achieved in a period of election uncertainty and with different timing of Easter holidays and Anzac Day which would have weighed on April sales this year (instead of late in March).
Margins were lower than forecast, with a large AI deal diluting gross profit margins to 9.1% from 10.1% the year previously.
With the RBA cutting rates for the second time this year, Dicker Data is highlighted by both brokers as positioned for recovery in demand assisted by the local rate easing cycle.
Net interest expense is forecast to decline, as the company has a variable rate debt profile, and as demand rises.
Margins for SMEs are also expected to normalise with an ongoing recovery in the PC and networking cycle.
Higher-margin AI PCs are also becoming a larger proportion of total PC sales.
Goldman Sachs notes the Windows 10 refresh cycle is leading to an uptake of higher-value devices.
Management at Dicker Data does anticipate profit before tax margins to improve to the mid-3ppts as the year progresses, against the 2.9% reported year-to-date.
Jarden trims EPS estimates to account for the softer-than-expected update, as does Goldman Sachs. Target price slips to $10.88 from $11 for Jarden and by -8% to $9.08 for Goldman Sachs.
Jarden is Buy-rated and believes Dicker Data is at an earnings inflexion point.
Goldman Sachs is Neutral-rated with the expectation of improving demand throughout the rest of 2025.
FNArena's consensus forecasts, based on modeling by UBS and Morgan Stanley, suggest Dicker Data shares are currently yielding 5.6% and 6.1% from prospective dividend payouts in respectively FY25 and FY26.
The first interim dividend for FY25 was paid out earlier this month.
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