(News Bulletin 247) – Morgan Stanley has raised its advice to overweight on the outsourced customer relations group. The financial intermediary says it has identified several positive catalysts for Teleperformance on the stock market in the short term.

Teleperformance is leading the CAC 40 this Tuesday. The stock of the outsourced customer relations specialist is currently up 4.8% to 107.70 euros, moving against a sharply declining Parisian market.

The stock is supported by Morgan Stanley, which raised its rating from overweight to in-line on the stock. The broker sees several near-term catalysts for the stock, and believes that “concerns have outpaced the reality of the threat from generative artificial intelligence (AI).” However, the broker is lowering its target price to €147 from €171 previously.

It must be said that Teleperformance’s valuation has suffered significantly in recent quarters, with the market fearing that generative artificial intelligence (AI) would disrupt its business model. The stock had also suffered from several disappointing growth publications.

But the group has nevertheless started the year better than analysts expected, with positive growth in the first quarter when the consensus expected a decline in its revenues. The share price jumped by more than 13% in the session following the publication, which illustrated the undervaluation of the company.

AI fears to be put into perspective

Morgan Stanley points out that Teleperformance saw its share price fall by 75% compared to its historic high of 402.1 euros reached in the first days of 2022. The share price suffered from fears of an upheaval in its economic model by artificial intelligence.

The broker acknowledges that the automation of professions will accelerate with the emergence of AI, which represents a risk for Teleperformance. However, Morgan Stanley gives very little credence to a total exclusion of the group from its market.

These AI fears are therefore exaggerated, Morgan Stanley believes. The financial institution therefore cites several arguments in favor of a more positive sentiment on Teleperformance. It also believes that Teleperformance’s forecasts for 2024 seem “achievable”.

Let us recall that the group had confirmed its objectives for the current year, on the sidelines of the publication of its first quarter activity report. Teleperformance anticipates pro forma growth of between 2% and 4% and an increase in its adjusted operating margin (EBITDA) of 10 to 20 basis points (i.e. 0.10 to 0.20 percentage points) compared to the figure of 14.9% in 2023 and excluding Majorel integration costs.

The research firm also expects the outsourced customer relations specialist to remove some of the uncertainties about its business by publishing medium-term forecasts by early 2025.

Morgan Stanley also expects Teleperformance to announce an additional cash return to shareholders before the end of the year. The research firm also notes “a renewed interest” in the case, highlighted by its recent discussions with European investors.