Opinions Ian Fung
Accenture Ltd.ACNPAST TOP PICKFeb 21, 2020
Ian FungStock price when the opinion was issued
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AI narrative has gone too far. Share buybacks and dividend increases. Consulting companies will incorporate AI into their toolkits. Very cheap. Yield is 3.67%.
(Analysts’ price target is $256.81)
Darren Sissons(Note the shortish timeframe.) Still likes it. Stock decline has been much worse than actual financial performance. EPS expectations have come down only ~5%, valuation massively re-rated down to ~16x PE from 23x. Fears of AI disruption. Macro economic concerns affected its main consulting business. Evidence that AI is going to eat the consulting model.
Layoffs in face of new realities. Gen AI can actually be a growth engine for them.
Technically challenged. Price is below 200-day MA, which seems to be trending lower. Also below 200-week MA, which is starting to round down -- that's a long-term tough ride.
Be concerned about slowing discretionary IT spending -- is AI taking over some of those needs? An underperformer.
The market sees AI as a threat to ACN's business, but the sell-off has been overdone. ACN has an opportunity to do really well by helping companies deploy AI. He believes ACN will find a way. Fundamentals remain very good. This is an opportunity. Innovation happens all the time, and there's always a need for consulting, even with AI. Plus, ACN has a 30-year track record.
We think of any of the industries that are going to be exposed to AI risks, the consulting space might be one of the more at risk areas. At the margins, clients are likely to increasingly consider whether they can use alternative means to get the type of value that consiltants provide. Obviously this does not mean it will supplant the entire industry but at least in the short-term we think it makes a lot of client rationalize and question their budgets in this area.
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An AI will take over the world story. Is in the same boat as Salesforce and Adobe. There's irrational exuberance over AI. He's staying in it. Wait and see. Will definitely buy more on a sell-off.
Darren SissonsIs hitting a 52-week low. It always trades poorly around its earnings report, but usually recovers. But this time, she doesn't see a recovery. They reported soft bookings, -6% YOY. Are now restructuring their services business, which she doesn't understand. Gross margins missed. She will likely trim her holdings.
Increased AI spending will not benefit companies with in-house IT departments where employees are being laid off. Share buybacks plus annual dividend increases. Selloff was chance to buy quality company on sale. Buying for new clients.
Darren SissonsConsulting on new technology rollouts globally for small, medium, and large businesses. Companies are going to need a lot of help implementing generative AI processes. This name is in the sweet spot for that revenue. Companies have to do this or be left behind. Yield is 1.9%.
(Analysts’ price target is $354.04)He still likes it, despite fears that the new president will reduce inefficiencies and this will impact ACN. He disagrees. ACN is very well-run. One third of profits pay dividends, another third buys back stock and the rest buys new consulting companies. A good model they execute well.
John O'Connell, CFAWent down, came back up, but basically flatlined. He sold in July. Bought 46 companies in the last year to the tune of about $6.6B, but it hasn't ended up on the bottom line. Has 775,000 employees. Client base is very sticky.
Buy in 1/3's here around $353, $335 (his targeted entry point), and $320.
(A Top Pick Jun 06/19, Up 18%) One of the largest consulting companies in the world. He liked how they have evolved in areas like digital innovation, cloud applications and security. It is a lower multiple way of playing the space, although they are a little smaller than their competitors. They operate from government to financial services and communications. He is still very bullish.