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On Wednesday, Stifel analysts launched coverage on Telus (NYSE:TU) International (NYSE:TIXT) with a positive outlook, assigning the stock a Buy rating and setting a price target of $5.00. According to InvestingPro data, the stock appears undervalued after falling over 62% in the past year, now trading at just 0.45 times book value.
The analysts' optimism is based on a proprietary survey of 50 Canadian C-level and senior executives who oversee approximately $5 billion in annual IT spending across various industries. Notably, about half of these executives represent large mid-market to enterprise-sized companies with revenues exceeding $500 million.
The survey revealed several key insights: 30% of the companies plan to accelerate their IT spending by the end of 2024, which could lead to an unexpected rise in fiscal quarter four performance. Additionally, nearly 80% of respondents anticipate an increase in their IT budgets for 2025.
This positive outlook aligns with InvestingPro analysis, which shows TIXT maintaining profitability with $355 million in EBITDA over the last twelve months. Over 75% of the surveyed companies expect to either increase or maintain their expenditure with IT services vendors, highlighting outsourcing and vendor consolidation as major trends.
Another significant finding from the survey is the focus on GenAI, which is considered a top-three priority, with over 60% of companies expecting GenAI to further boost their budgets. However, the commercialization of GenAI is still in the early stages. Stifel's analysts suggest that this positive spending outlook for IT services indicates a clearer picture of the macroeconomic environment, enhancing the attractiveness of the risk-reward balance in the sector.
The coverage expansion by Stifel also includes Telus Digital (TIXT) with a Buy rating and a price target of $5.00, as well as Converge Technology (CTS (NYSE:CTS)) with a Hold rating and a price target of C$4.00. The analysts' commentary underscores their belief in the sector's potential, supported by the constructive spending outlook for IT services. For deeper insights into TIXT's valuation and growth prospects, including 8 additional ProTips and comprehensive financial analysis, investors can access the full Pro Research Report available on InvestingPro.
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