Accenture is no longer “relatively attractive,” says Morgan Stanley as it lowers rating

Morgan Stanley on Wednesday downgraded Accenture (NYSE:ACN) to “Equal Weight” from a previous investment rating of “Overweight” and said that they do not see the IT services and consulting company as “relatively attractive.”

Morgan Stanley said it expects potential valuation compression from decelerating cloud growth, a longer-than-expected time for revenue contribution from generative AI, and more acquisition spend for the company.

“As investor expectations have largely come down across the IT services space, we think the relative opportunities in our space are more balanced and therefore find it prudent to downgrade ACN to EW. Our downgrade to EW contemplates 1) decelerating cloud revenue; 2) marginal near-term Gen AI revenue contribution; and 3) accelerating M&A spend as a % of FCF,” Morgan Stanley analysts wrote in a June 26 analysis.

Morgan Stanley now expects Accenture’s FY25 revenue to be $67.539B and EPS to be $12.48 per share, which contemplates +4.0% y/y constant currency growth and +10bps of margin expansion.

ACN is down 13.3% so far this year as of Tuesday’s close. Stock fell as much as 2.5% by midday.