Accenture (NYSE:ACN) was in focus on Tuesday as investment firm Stifel lowered its price target on the technology consulting firm, citing negative sentiment.
“Flattish [to low-single-digit] industry growth combined with relative strength of AI-leveraged software/semiconductor weighing on investor sentiment with ACN underperforming equal-weight S&P [roughly 2,5000 basis points over the last 90 days],” analyst David Grossman wrote in a note to clients. “While cyclical dynamics [are] at-play, AI disintermediation [is the] default market narrative.”
Grossman kept his Buy rating on Accenture but lowered his price target to $315 from $355.
In addition, there has been a focus on what Grossman said are “perceived higher risk areas,” such as digital marketing, application services and government spending due to the cuts made by the Department of Government Efficiency. The headwinds are “legitimate,” Grossman conceded, but the fears could wind up exceeding reality, he posited.
Grossman conceded that it is a “tough environment” for consulting firms, but the risk-reward is “highly compelling” for those with longer-term investment horizons.
“Large global enterprises (ACN’s core) move very deliberately,” Grossman explained. “While there is a lot of enthusiasm and continuous conversations about AI, it is also creating a pause in the market given deploying AI strategies within the enterprise market requires significant re-engineering of strategies and work flows as well as IT infrastructure. While too early to gauge and this remains at the center of the debate, changes in technology typically drive meaningful incremental spend overtime for those service providers with the applicable skills.”