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On Monday, Baird analyst David Koning upgraded shares of Accenture plc (NYSE:ACN) from Neutral to Outperform, setting a price target of $390.00. Currently trading at $318.82 with a market capitalization of $199.4 billion, InvestingPro analysis indicates the stock is slightly undervalued, with a "GOOD" overall financial health score. Koning expressed confidence in the company’s upcoming fiscal second quarter, anticipating a mild beat in performance. The upgrade comes despite Accenture’s recent stock performance being affected by sluggish IT demand and concerns about DOGE (US federal spending), which accounted for 8% of the company’s fiscal 2024 revenue.
Koning highlighted the strength of Accenture’s Managed Services, which represent approximately 50% of the company’s $66.4 billion annual revenue, and are expected to maintain robust demand. The analyst’s positive outlook is further supported by Accenture’s strong free cash flow exceeding $9 billion, its defensible market position, and the potential for accelerating growth beyond its current 2.75% revenue growth rate. InvestingPro data shows the company maintains a healthy dividend yield of 1.86% with 21 consecutive years of payments.
Accenture’s ability to capitalize on the increasing demand for Generation AI technology is seen as a key factor that could contribute to the company’s return to favor in the market. Koning’s commentary suggests a belief in Accenture’s resilience and potential to leverage its capabilities in the face of industry challenges.
The upgrade reflects a significant shift in Baird’s assessment of Accenture’s market prospects, with the new price target of $390.00 representing a vote of confidence in the company’s financial health and strategic direction. The analyst’s expectations for the fiscal second quarter and the emphasis on Managed Services demand underscore the factors that could drive Accenture’s performance in the near term.
In other recent news, Accenture is preparing to release its second-quarter results on March 20, with analysts from Piper Sandler and TD Cowen adjusting their price targets for the company. Piper Sandler has reduced its target to $396, citing concerns over Accenture’s ability to meet financial expectations amid an uncertain economic environment. TD Cowen, meanwhile, has set a price target of $394 but maintains a Buy rating, expecting the company to slightly exceed Wall Street forecasts and adjust its full-year guidance. Accenture has also made a strategic investment in OPAQUE, a confidential AI technology platform, to enhance data security and privacy in AI operations. This investment aligns with Accenture’s focus on responsible innovation and aims to boost AI deployment capabilities. Additionally, Accenture is acquiring Soben, a construction consultancy, to strengthen its capital projects capabilities, particularly in the data center market. This acquisition is expected to enhance Accenture’s project management offerings across industries. Lastly, Accenture has partnered with CrowdStrike (NASDAQ:CRWD) to improve cybersecurity operations, integrating advanced threat management solutions to streamline security workflows and reduce costs.
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