Accenture (ACN) is a top company in the technology consulting industry, where it helps companies and governments implement complex projects.
It is one of the top employers with over 733,000 workers globally. These employees help other companies implement technologies like cloud computing, cybersecurity, and artificial intelligence.
For example, a bank that wants to migrate its core software will opt to hire Accenture or one of its competitors to implement the project. The same is true for companies implementing other tech projects.
Most of Accenture’s revenue comes from the consumer staples and discretionary sectors followed by health and public services, financial, communications, and media.
Accenture operates in a highly competitive industry, where the other top contenders are companies like Wipro, Infosys, and Cognizant Technologies.
The Accenture stock price was trading at $363, its highest point since March 18, while its HypeIndex metric rose to 105%.
Positive hype
Accenture’s business has done well in the past few years, helped by emerging technologies like machine learning, artificial intelligence, and cloud computing.
Its annual revenue has surged from over $44.3 billion in 2020 to $65 billion in the last financial year.
While the industry is highly competitive, it has created long relationships with companies like Procter & Gamble, Unilever, and Johnson & Johnson.
The company will benefit as IT spending starts rising as interest rates start moving downwards. Gartner estimates that IT spending will rise by 7.3% this year to $5.26 trillion. Most of this growth will be because of the rising generative AI spending.
Accenture published strong financial results for its fiscal fourth quarter. Its new bookings jumped to $20.1 billion. Generative AI bookings grew to $1 billion.
The company’s two divisions - consulting and managed services - grew by 1% and 5% to over $8.26 billion and $8.15 billion.
It has higher margins compared to its peers. Its net income margin is 11.20%, higher than the sector median of 3.75%.
Analysts are optimistic that Accenture’s business will continue doing well, with its next annual revenues expected to rise by 6.50% to $69 billion.
Accenture’s has also attracted significant hype has its stock has continued rising in the past few months. It has risen by 31% from its lowest point in May.
Analysts expect that its stock will rise to $382, up by about 5% from the current level.
The company may continue doing well as the generative AI spending accelerates.
Accenture has inked a partnership with Nvidia focused on AI adoption.
It is also buying back shares worth over $4 billion in a bid to boost its earnings per share.
Negative hype
The biggest negative hype is that Accenture is highly overvalued. It has a forward P/E ratio of 28, higher than the S&P 500 index average of 21.
The company’s growth trajectory has waned despite the growth in key technologies like AI and machine learning. It has a forward revenue growth of 8.95%.
The consulting industry is a highly competitive one, with Indian companies like Infosys and Wipro undercutting Accenture in some key markets.
Summary of Accenture stock
The daily chart shows that the ACN stock price has been in a strong bull run in the past few months. It recently formed a golden cross as the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other. In most periods, this is one of the most bullish signs in the market.
Oscillators like the Relative Strength Index (RSI) and the MACD have all tilted upwards. Therefore, the stock will likely continue rising as traders target the year-to-date high of $383, which is 5.40% higher than the present level.
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