(News Bulletin 247) – Bank of America raised its buying advice on the digital services company and raised its target to 21 euros, fueling the rise in the stock on Monday.

If Atos is far from being completely back on its feet, its annual results published last week clearly marked a step in the right direction. Both revenues, margins, net debt and the outlook for 2023 were better than expected by analysts.

These encouraging results have prompted some research departments to revise their forecasts, or even copy them. This is the case on Monday with Bank of America, which revised its buying opinion on the stock, against “neutral” previously, and raised its price target to 21 euros (against 13.8 euros previously), i.e. a potential of about 40% compared to the current price.

On the Paris Stock Exchange, the Atos share is carried by this change of opinion, evolving up 6.2% around 3:30 p.m., one of the strongest increases in the SBF 120.

For the American bank, if the horizon of the digital services company remains “cloudy” it is “slowly clearing up”.

A historic activity ahead of its recovery plan

“Although it can be said that Atos is still at the beginning of a multi-year restructuring journey, management’s actions are starting to bear fruit, while the company’s medium-term outlook looks less negative. than on Capital Market Day [une journée dédiée aux investisseurs, NDLR] of June 2022, in particular in the Tech Foundations unit”, develops the bank.

This unit brings together the historical businesses of Atos, such as outsourcing, which is in structural decline, due to competition from dematerialized computing (“cloud”) which has gained in force with the health crisis.

Bank of America considers that the annual results of Atos have shown progress in its recovery, thanks in particular to the reorientation of the activity in areas with higher added value and the optimization of the cost base. The design office notes that this unit posted an adjusted operating margin in the green in 2022, three years ahead of Atos’ forecasts. This significantly “de-risks” the execution of the roadmap to straighten out this division, judges the financial intermediary.

An attractive risk-return ratio

Atos’ strategic plan plans to keep this “Tech Foundations” activity and to split the other major division, Evidian (cybersecurity, digital transformation, supercomputers), 70% of whose capital will be distributed to shareholders on the occasion of a IPO scheduled for the second half of 2023.

Bank of America values ​​the 30% that Atos is supposed to keep in the capital of Evidian at around 400 million euros on the basis of an Atos share price of 14 euros. However, Atos could very well sell this stake and discussions are currently underway in this regard with the aeronautics group Airbus.

As the two groups have stated on several occasions, there is no certainty that the transaction will succeed, especially since the TCI fund, an Airbus shareholder, is against such an operation.

Nevertheless, if this operation were to be concluded on the basis of an enterprise value of 7 billion euros, the amount circulating in certain media, Bank of America calculates that the value of the 30% stake in Evidian would pass to 1.2 billion euros. This would add 7 euros per share to its target of 21 euros.

In the end, Bank of America judges that despite its lower growth and margin profile than its competitors, Atos offers an attractive risk-return ratio with multiple catalysts.