Ingram Micro (INGM) faces competition in India and weaker demand in Europe, leaving gross margin headwinds countering cost efficiencies after mixed Q4 results, Morgan Stanley said Wednesday in a report.

The Q4 results showed "better revenue but lower profitability," while a "2025 return to growth remains likely, Morgan Stanley said. Still, India is "having an outsized impact" on earnings, resulting in a lower full-year profit estimate, the report said.

"Management is optimistic on a return to topline growth in 2025, driven by continued momentum in client and endpoint solutions" and growth in cloud and other segments, Morgan Stanley said. Still, "the improving demand backdrop is not yet broad-based," the report said.

Inventory levels may fluctuate as Ingram adjusts for tariff-related cost management, the report said.

Morgan Stanley raised its price target on Ingram Micro's stock to $27 from $26 and kept its overweight rating.

Ingram Micro hares fell 7.8% in recent Wednesday trading.

Price: 19.35, Change: -1.64, Percent Change: -7.79