Broker snap: Micro Focus fall overdone

2nd Jul 2010 11:38

The purchase of £400,000 worth of Micro Focus shares by the company's chairman at the tail end of 29 June is a sign that the software firm's shares have fallen too far, according to Canaccord.The financial services firm notes that the company's shares have fallen a further 20% since well respected finance director Nick Bray announced his resignation, and that's on top of a 14% fall suffered after Stephen Kelly quit as chief executive officer (CEO).At the same time, earnings estimates have been upgraded by 20% since the board room upheaval started, leaving Canaccord at a loss as to why the company appears to be so unloved."MCRO [Micro Focus] is the fourth-largest listed UK software company that is highly cash generative, and has both organic and acquisitive growth potential. The new CEO Nigel Clifford is respected with 30 years of experience leading technology companies including Symbian, Cable and Wireless and BT," Canaccord said.The company should not have much difficulty finding another strong chief financial officer to replace Nick Bray, Canaccord believes.The firm has reiterated its "buy" recommendation but has cut its price target from 540p to 510p to reflect market weakness.