We recently published a list of Top 10 AI Stocks Investors are Talking About in October. Since Accenture plc (NYSE:ACN) ranks 10th on the list, it deserves a deeper look.
Venu Krishna, Barclays head of U.S. equity strategy, said while talking to CNBC in a latest program that he is not revising his S&P 500 year-end projection of 5,600 because he believes stock valuations are “full.”
“If you see what’s happening, numbers (earnings) have been cut sharply going into the end. What is still anchoring the market is big tech, even though their earnings themselves are kind of decelerating. Then seasonality comes into play. October is the weakest month, and you don’t want to get ahead of that.”
Asked whether he does not believe the market really broadened out, Krishna said while there were some signs of market broadening, the “anchor” of the rally remains big tech, which according to him, are just six stocks.
Moving beyond the earnings and valuations debate, another factor still impacting investor sentiment is the Federal Reserve’s next moves.
Talking about the latest Fed minutes released October 9, Wolfe Research’s Stephanie Roth said on CNBC that a “substantial” majority of Fed officials wanted a 50-basis-point rate cut. However, she said in the next meeting, a 50bps rate cut is “off the table.”
For this article we picked 10 AI stocks trending on latest news. With each stock we mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Accenture Plc (NYSE:ACN)
Number of Hedge Fund Investors: 68
Accenture made news after the company expanded its AI partnership with Nvidia. The deal includes launching a new Accenture division called Nvidia Business Group.
NVDA CEO Jensen Huang also commented on the deal.
“AI will supercharge enterprises to scale innovation faster. Nvidia’s platform, Accenture’s AI Refinery, and our combined expertise will help businesses and nations accelerate transformation for greater productivity and growth.”
Wedbush Securities analyst Dan Ives said the deal is setting the stage for AI’s impact on the enterprise. “This major partnership will drive corporate AI adoption and signals the next phase of the AI revolution,” Ives wrote in a note to clients. He highlighted the ripple effects expected across the tech sector.
Accenture also impressed Wall Street with strong quarterly results. The key news here was $20.1 billion in new bookings, up 21% from Q4 2023. Management highlighted strong demand for its generative AI tools, signaling growth potential into 2025 and beyond. AI-related services now make up over 5% of the business after just one year.
Higher profitability followed, with the Q4 operating margin reaching 15%, up 10 basis points from last year, thanks to cost efficiencies and tech investments. The company expects further margin growth.
At 28 times its fiscal 2025 EPS estimate of $12.77, Accenture looks attractive. This forward P/E ratio is below its 5-year average, suggesting the stock may be undervalued given its strong momentum.
Aoris International Fund stated the following regarding Accenture plc (NYSE:ACN) in its Q2 2024 investor letter:
“The largest detractors for the quarter were Accenture plc (NYSE:ACN) and CDW Corp, which both fell by around 14%. Accenture and CDW are currently experiencing flattish years in terms of revenue and earnings growth. This follows a period of post-pandemic elevated demand. We believe both companies continue to gain market share.
Accenture is the world’s largest IT outsourcing and consulting company. While earnings in its quarter ended May was essentially flat, we were very encouraged by underlying demand. This demand strength is reflected in a 22% year-on-year increase in client bookings for the quarter. Further, the number of $100m+ contracts signed in the nine months to May was 92, up from 85 in the same period a year earlier. All this bodes well for Accenture’s revenue and earnings in the next few years.”
Overall, Accenture plc (NYSE:ACN) ranks 10th on Insider Monkey’s list titled Top 10 AI Stocks Investors are Talking About in October. While we acknowledge the potential of Accenture plc (NYSE:ACN), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ACN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.