We recently published a list of Top 10 Latest AI Stock News and Analyst Ratings. Since Accenture Plc (NYSE:ACN) ranks 1oth on the list, it deserves a deeper look.
The much-feared correction in mega-cap tech stocks is here as investors keep pulling out of AI winners to pile into small-cap stocks as possible rate cuts from the Federal Reserve near. Brent Thill, Jefferies tech research analyst, recently said while talking to CNBC that we are seeing a rotation inside the tech industry where semiconductor and internet companies are performing well while software companies are underperforming. However, Thill reiterated his view that in the back half of the year things will start to change and tech companies will start their rebound. The analyst cited a few software earnings that suggest no signs of “demand cracks.” He said that many semiconductor stocks are now in the overbought territory.
Brent Thill said the selloff has made software stocks more “attractive.”
But Thill also sees a broader rotation ongoing in the stock market, where sectors like financials and industrials are benefitting amid investor exodus from tech.
Asked what is causing a sudden rebound in small-cap stocks, Thill said that interest rate cut expectations and a broader rotation out of mega-cap stocks have a role to play here, in addition to the M&A activity which has increased significantly recently.
Thill thinks the AI “payoff” time is still years away and companies are still at the beginning of the AI spending curve.
For this article we compiled the biggest AI news updates and analyst rating upgrades/downgrades around AI stocks over the past few days. With each stock we have 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: 57
Earlier this month UBS upgraded Accenture Plc (NYSE:ACN) to Buy from Neutral with a $400 price target.
UBS analyst Kevin McVeigh said in a note that cybersecurity and generative AI should lead to “higher and more durable growth” for Accenture Plc (NYSE:ACN). The analyst thinks the stock does not reflect the extent of how big generative AI could be for the company.
Accenture Plc (NYSE:ACN) is one of the dominant names in the IT services and consulting industry with $5.06 billion in cash flows as of the end of last year. Accenture is set to benefit from the AI boom as companies need help and consultancy for the actual deployment and implementation of AI technologies.
Accenture Plc (NYSE:ACN) will benefit from secular growth catalysts in the IT services industry. By 2033, IT Service industry revenues are projected to reach $1.06 trillion, from $578.1 billion in 2023, growing at a 6.3% CAGR.
In June Accenture Plc (NYSE:ACN) posted fiscal Q3 results. New bookings in the quarter jumped a whopping 22% year over year, the highest growth in new bookings over the past two fiscal years. The company has made a whopping 35 acquisitions in the fiscal year so far and it’s in an aggressive growth mode. Talking about generative AI business, Accenture Plc (NYSE:ACN) management said during the latest earnings call:
We also have leaned into the new area of growth, GenAI, which is comprised of smaller projects as our clients primarily are in experimentation mode, and this quarter we hit two important milestones. With over $900 million in new GenAI bookings this quarter, we now have $2 billion in GenAI sales year-to-date, and we have also achieved $500 million in revenue year-to-date. This compares to approximately $300 million in sales and roughly $100 million in revenue from GenAI in FY 2023. Leading in GenAI positions us to help our clients take the actions needed to reinvent and to benefit from GenAI, which frequently means large-scale transformations
The stock is trading at 26 times its 2025 EPS estimate of $12.79 set by Wall Street.
Polen Focus Growth Strategy stated the following regarding Accenture plc (NYSE:ACN) in its Q2 2024 investor letter:
“Autodesk and Accenture plc (NYSE:ACN) were also notable absolute detractors in the quarter. For Accenture, the past year has proven to be a weak backdrop for the IT services industry as enterprises rationalize their IT budgets and defer spending on discretionary, shorter-cycle deals. Accenture has not been immune to this broader weakness, as evidenced by slowing growth in recent quarters. However, we would note that later in the quarter, the stock responded very positively to results that showcased AI bookings growing rapidly, though still a small portion of overall bookings. Additionally, as we head into 2025, growth comparisons should ease considerably.”
Overall, Accenture Plc (NYSE:ACN) ranks 10th on Insider Monkey’s list titled Top 10 Latest AI Stock News and Analyst Ratings. 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.