Berenberg initiated coverage of 74Software with a Buy rating and a €44 price target, implying a 53% upside from its last closing price. The analyst, Wolfgang Specht, highlights improving cash flow, deleveraging potential, and limited AI disruption risk as key drivers. Formed after Axway's acquisition of Sopra Banking Software in 2024, 74Software is positioned as a specialized enterprise software platform.

Specht forecasts strong free cash flow expansion, projecting a 16% CAGR in operating FCF through 2028, which should support rapid deleveraging and reinvestment capacity. Annual cost savings of €6-8 million and cross-selling Axway services into SBS customers are also identified as growth levers. The analyst downplays AI disruption concerns, arguing 74Software's security and compliance focus will lead to gradual, peripheral AI adoption, giving the company time to optimize its own solutions or form partnerships. Operating margins are projected to nearly double from below 7% in 2024 to over 13% by 2028, significantly boosting EBIT and free cash flow. Leverage is expected to fall below 2.5x EBITDA by year-end 2025 and below 1.0x by 2027, opening avenues for M&A, buybacks, or future dividends.