CDW's (CDW) post-Q3 stock decline, following a revenue miss, was overdone, as its positive risk-reward asymmetry and a decade-low valuation make it an attractive pick, Morgan Stanley said.

Large enterprise hardware spending fell short of expectations in Q3 amid weaker demand for storage and servers, but PC growth sustainability, netcomm gains, and services segment strength surprised to the upside despite a negative hardware mix shift, the brokerage said in a research note Tuesday.

Factors such as the hardware mix shift and elevated performance-based pay continue to hinder CDW's ability to drive EPS growth this year. Large corporate spending is expected to perform similarly in Q4.

Morgan Stanley said it expects low-single-digit revenue growth and modest gross margin expansion in 2026 as PC tailwinds subside amid a positive mix shift. It projects 2026 EPS of $10.63.

The US government shutdown is weighing on business, though a reopening before the end of the quarter could lift consensus Q4 estimates, according to the note.

Morgan Stanley reiterated its overweight rating on CDW and lowered its price target to $191 from $202.

Price: 142.70, Change: +1.04, Percent Change: +0.73