(BFM Bourse) – The German bank lowered its advice on the stock to “hold” against “buy” previously and drastically reduced its price target. It follows in the footsteps of UBS.
It’s hard to convince the market of its resilience in the face of the emergence of generative artificial intelligence (AI), the one at the heart of ChatGPT, for Teleperformance.
The outsourced customer relations specialist, which has suffered the biggest drop in the CAC 40 since the start of the year, has been in the eye of the investor storm since the start of the year. If other reasons explain the drop in its share price, such as disappointing publications on growth and a poorly received acquisition (Luxembourg’s Majorel), the market is also and perhaps mainly concerned about the repercussions that AI can have. generative on the company’s activity model.
The company assures that this technological phenomenon will be positive for it, in particular through an improvement in its productivity. The company also has its own “PET genAI” tool. But investor perception is difficult to change.
And this Monday Deutsche Bank added itself to the list of financial intermediaries expressing their concerns on this subject.
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Price pressure
The German bank revised its opinion on Teleperformance, moving from “buy” to “hold” while slashing its price target to 130 euros from 290 euros. This weighs once again on the Teleperformance share which fell by 1.9% this Monday to 117 euros around 10 a.m., showing the sharpest decline in the CAC 40.
The German bank puts the short-term scope of generative AI into perspective. “Generative AI is still a nascent technology and it will take time to launch large-scale volume automation, with key barriers to large-scale adoption expected to remain in place over the coming quarters,” she writes in a summary of his note.
But longer term, “we believe that large-scale automation is likely to result in a turbulent operating environment and significant pricing pressure in the medium term, leading to significantly slower revenue growth and profitability weaker for Teleperformance compared to the last decade.
This observation is consistent with that made last week by UBS. The Swiss bank had revised its growth and profitability outlook for the group downwards, due to the pressure on prices exerted by the emergence of generative AI. For her, the tools resulting from this technology will accelerate the deflation observed in the prices of outsourced customer relations services. Consequently, it expects medium-term like-for-like growth of 4.5% per year, compared to 9% over the last ten years.
Scrapping recovery
For its part, Morgan Stanley judged in May that the rise of generative AI could hamper Teleperformance’s growth potential. The bank believed that the development of these technologies could mean “that the composition of the business will change and, at this stage, the likely outcome appears to be slightly lower growth with a higher margin.”
The fact remains, for the most optimistic investors, that Teleperformance’s current valuation is clearly cheap, perhaps to the point of exaggerating fears about AI.
“We continue to believe that the main drag on Teleperformance’s valuation is the fear of AI disruption and that the current share price does not reflect Teleperformance’s potential to continue to adapt, capitalize on new revenue streams generated by AI and benefit from increased penetration of outsourcing and organic market share gains”, explained last week Royal Bank of Canada, which has advice to ” outperform” on the stock, equivalent to buying.
Julien Marion – ©2023 BFM Bourse
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