8. Concentrix Corp. (NASDAQ:CNXC)
Average Upside Potential as of November 26: 58.16%
Number of Hedge Fund Holders: 21
Concentrix Corp. (NASDAQ:CNXC) is a global provider of customer experience solutions that help businesses improve their interactions with customers. It offers a range of services, including customer support through various channels like voice, chat, and email, as well as technology-driven solutions for process optimization and analytics. It’s a team of technologists and engineers who build and integrate technology solutions and the infrastructure that powers them.
The company’s offerings in process automation and data analytics set it apart from competitors. Its extensive global reach and diverse customer base provide a strong foundation for sustained growth. To further strengthen its position, it’s investing in technology and GenAI. The company’s AI advancements in knowledge management, customer support, and automation are expected to drive efficiency and cost savings. The recent patent for its AI platform, GILES, which automates coding and testing processes, highlights its commitment to innovation.
Concentrix Corp. (NASDAQ:CNXC) reported solid financial results for the third quarter of 2024, ending in August. The company is actively transforming its business by focusing on higher-value, long-term contracts and leveraging technology to drive efficiency. However, it faces challenges such as lower transaction volumes in certain segments and margin pressure from dual costs and upfront investments. Despite these challenges, the company remains optimistic about its long-term growth prospects, driven by its strong market position, strategic investments, and ability to adapt to changing industry dynamics.
FPA Queens Road Small Cap Value Fund stated the following regarding Concentrix Corporation (NASDAQ:CNXC) in its Q3 2024 investor letter:
“Concentrix Corporation (NASDAQ:CNXC) is one of two top customer experience (CX) vendors globally. The company began by managing call centers but has since evolved into a high-tech business process outsourcer (BPO) that also designs and runs customer-facing websites and apps, integrates the data, and optimizes a client’s customer interactions. The company was spun out from TD Synnex, another of the Fund’s core holdings, and we have always been impressed with CNXC’s innovation and growth. CX is a relatively new business model, and Concentrix has been rolling up smaller competitors. In March, 2023 they bought WebHelp, a leading European CX player, for $4.8B in cash and stock. 22 We believe the WebHelp acquisition will help consolidate an industry where Concentrix and Teleperformance are the largest players.
The market is currently concerned about the potential of artificial intelligence to disrupt Concentrix’ core call center business – all CX companies’ shares are down badly over the last two years.23 On Sep. 25, 2024 CNXC stock got hit again when they released fiscal 2024 Q3 results and took down revenue guidance – fiscal 2024 organic revenue is now expected to come in between -.5% and 1.5%. 24 Concentrix has a debt to EBITDA ratio of 3x from the Webhelp deal which will be a problem if earnings deteriorate quickly. But Concentrix now trades at less than five times adjusted EPS and is highly cash generative. We think, but don’t know, that Concentrix’ domain knowledge and integration into customers’ work flows make for meaningful switching costs and that clients will be reluctant to let AI manage the relationships with their customers. We have held on to Concentrix shares but have not added to the position.”
