(News Bulletin 247) – The research office has switched to purchasing the outsourced customer relations group, judging that the group’s poor dynamic will be reversed this year and that the current valuation assumes a very pessimistic scenario on the impact of artificial intelligence.

If Alstom had not experienced an atrocious session in October (-37.58% in one day), following its warning on cash, there is no doubt that Teleperformance would have suffered the worst performance in the CAC 40. The specialist in outsourced customer relations lost 40.7% last year, and only the designer of the TGV (-46.63%) did worse.

Teleperformance, which joined the CAC 40 in 2020, suffered from a fairly explosive cocktail. Its growth has disappointed several times in the latest publications, forcing the company to revise its annual forecasts downwards several times, and the takeover of the Luxembourg group Majorel for 3 billion euros was hardly appreciated by an accustomed market. to small and medium-sized acquisitions by the company.

Perhaps further weighing on investors’ concerns about the impact of artificial intelligence (AI) and generative AI on the company’s business model. If the company assures that it will benefit from AI, through increased productivity for example, investors for their part fear an upheaval and some analysts have warned of a risk of increased pressure on the prices of customer relations services.

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“The start of a new adventure”

Can Teleperformance nevertheless take its stock market revenge this year? Some analysts seem to think so anyway. Exane BNP Paribas resumed its “outperformance” coverage last week with a price target of 205 euros.

This Friday, Stifel, in turn, dared to be more constructive on value. The research office went from “hold” to “buy” on the stock, with a target raised to 200 euros compared to 170 euros previously. This brings Teleperformance up 6.3% around 11:30 a.m., the strongest performance on the CAC 40.

Stifel believes that value is found “at the start of a new adventure.” The bank considers that the slowdown in the company’s growth, the cause of numerous lowering of consensus earnings forecasts in recent quarters, should have bottomed out in the second half of 2023.

The company’s business is expected to pick up in the coming quarters, thanks to a lenient comparison base and outsourcing opportunities from future clients, while volume growth “should return at some point”, says worth Stifel. The establishment expects Teleperformance’s revenues to increase on a comparable basis by 4.5% this year and then by 5.5% in 2025.

A weight of AI too heavy on the action?

Beyond this change in growth trend, Stifel points out the excessively low valuation in its eyes of Teleperformance. According to the bank, the current price includes a very negative scenario regarding the impact of generative AI, which neglects the competitive advantages of Teleperformance and certain fundamentals of its model.

The establishment cites its leading position in a fragmented market which gives it a significant advantage in terms of size and a more diversified profile than its competitors. These strengths were reinforced by the acquisition of Majorel, Stifel explains, which should help Teleperformance continue to gain market share.

“In addition, we recognize that the development of artificial intelligence is only at an early phase and brings some uncertainties to the revenue model (of Teleperformance, Editor’s note),” explains Stifel.

“That said, we see some offsetting factors for any potential price dilution, while we currently see no significant evidence suggesting a reversal of the trend towards outsourcing” of outsourced customer relationship services, the bank notes.

Stifel recognizes that its advice may come a little early and that Teleperformance shares could, in the short term, still show some volatility. But she judges that the return/risk ratio of the stock is attractive and that a re-appreciation of stock market multiples is looming over several years, with a price which could double and reach 280 euros in three years.