Amdocs stock rating downgraded to Peerperform by Wolfe Research

Investing.com - Wolfe Research downgraded Amdocs Ltd. (NASDAQ:DOX) from Outperform to Peerperform on Thursday, citing concerns about the company’s growth trajectory. The stock has fallen 7.53% over the past week and is now trading near its 52-week low of $76.50, with technical indicators suggesting it’s in oversold territory according to InvestingPro data.

The research firm pointed to lackluster 2026 revenue guidance and increased costs related to AI investments as key factors behind the rating change. Wolfe Research had previously anticipated that Amdocs would accelerate top-line growth through new project wins and AI-based revenue streams. This aligns with InvestingPro data showing analysts forecast a 10% revenue decline for the current fiscal year, despite the company’s P/E ratio of 16.6 suggesting premium valuation.

Wolfe Research expressed concern that Amdocs is "finding it harder and harder to grow," likely due to ongoing financial pressures affecting its telecom operator customers. The firm specifically noted that slower discretionary business at T-Mobile was particularly concerning.

The downgrade reflects Wolfe Research’s growing impatience with its previous investment thesis, which had assumed Amdocs could leverage AI within its own business to drive additional sales on a lower cost structure.

Instead, Amdocs has indicated it will raise its cost structure to invest in AI, contradicting the research firm’s earlier expectations for operational efficiency improvements.

In other recent news, Amdocs Limited reported its fourth-quarter fiscal 2025 results, which slightly exceeded analyst expectations. The company posted adjusted earnings per share of $1.83, just above the consensus estimate of $1.82. Revenue for the quarter was $1.15 billion, surpassing the expected $1.14 billion, despite a 9.0% year-over-year decline due to the strategic phase-out of low-margin, non-core business activities. Amdocs also announced an 8% increase in its quarterly dividend, reflecting its shift toward higher-margin business activities.

BofA Securities and Stifel both lowered their price targets for Amdocs to $97 from $100, while maintaining a Buy rating. BofA cited slower growth as a reason for the adjustment, while Stifel noted the "decidedly mixed" earnings report, with revenue, earnings per share, and free cash flow exceeding consensus estimates, but margins falling short of expectations. Amdocs’ operating margin improved to 21.6%, up 290 basis points year-over-year, driven by the phase-out of non-core businesses and enhanced operating efficiencies. These recent developments highlight the company’s ongoing strategic adjustments and financial performance.

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