Tech Data: Ladenburg Initiates at “Buy,” Sets $41 Target

Electronics distributor Tech Data (TECD) is up fractionally today following an initiation-of-coverage note from Ladenburg Thalmann analyst Nancy Hull, set a “Buy” rating and a $41 price target. Hull says the company has done an admirable job of controlling costs to increase profit despite tough times in the industry.

She also thinks a deal announced in March to distribute Dell (DELL) computers validates the importance of the company’s sales channel.

“Besides enhancing TECD’s customer base, the deal goes a long way in underscoring the benefits of the two-tier distribution model,” said Hull, referring to the combination of Dell’s direct sales with a reseller channel via Tech Data. “TECD’s relationship with Dell, which was once viewed as the poster child for the direct selling model, provides testimony to the benefits offered by the two-tier model, namely better customer coverage, improved logistical efficiency and shorter turnaround time.”

Hull believes TECD’s scale will be an advantage: It is the largest electronics distributor in Europe, and the second-largest in the North America. Hull doesn’t specify, but the largest distributor in North America is Ingram Micro (IM), according to the company’s most recent quarterly filing with the SEC.

Hull says her $41 target represents an EV/Ebitda multiple of 7.3x her 2010 Ebitda estimate of $243 million.

Tech Data shares are up 7 cents, or .2%, at $35.42.