TD Synnex (SNX) stands out positively in a "cautious" hardware sector due to strong execution, distribution share gains, and more exposure to cloud infrastructure spending than expected, Morgan Stanley said in a Wednesday note.

The firm said that TD Synnex's fiscal Q1 earnings and fiscal Q2 guidance were ahead of expectations, reflecting the strength in near-term demand.

Morgan Stanley said that the company's fiscal Q1 results strengthened its thesis on TD Synnex, which was dependent on "solid" execution within core distribution, Hyve as an underappreciated growth and margin tailwind, and cost discipline driving margin expansion.

The firm said that Hyve's growth is stronger than expected, with a building pipeline of new US hyperscaler customers, and is more profitable than prior expectations.

Morgan Stanley has an overweight rating on the stock and increased its price target to $218 from $174.

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