Accenture Faces Challenges as Generative AI Disrupts Revenue Growth

By Don Francis, Editor
May 16, 2024 7:59 AM UTC
Accenture Faces Challenges as Generative AI Disrupts Revenue Growth

Deutsche Bank's Bryan Keane downgraded their rating on Accenture (NYSE: ACN) from Strong Buy to Hold on 2024/05/15. The analyst also lowered their price target by 27.9% from $409 to $295.

According to Keane, Accenture's Q2 2024 organic revenues experienced a 2.5% decline, transforming the company from a share gainer to a market loser in the IT services industry. Keane's cautionary advice to investors is based on Deutsche Bank's channel checks, which indicate that Accenture's management guidance is "fundamentally weak" and that the Street consensus will be revised downwards further.

The channel checks conducted by Deutsche Bank revealed that generative AI is disrupting Accenture's current price structures and will not generate "massive revenue increases in the near or medium future." This assessment suggests that Accenture may face challenges in its revenue growth trajectory.

Currently, 50% of top-rated analysts rate ACN as a Strong Buy or Buy, while the other 50% view it as a Hold. No analysts recommend or strongly recommend selling the stock. This mixed sentiment among analysts reflects the uncertainty surrounding Accenture's future performance.

The consensus forecast among analysts is that ACN's upcoming year will deliver earnings per share (EPS) of $12.9. If the analysts' predictions hold true, ACN's next yearly EPS will experience a 15.5% increase on a year-over-year basis. This positive outlook suggests that despite the recent downgrade, there is still optimism regarding Accenture's long-term prospects.

However, Accenture's stock price has faced significant challenges in recent months. Since the company's last quarterly report on 2024/02/29, the stock price has declined by 17.7%. On a year-over-year basis, however, the stock is still up by 11.2%. It is worth noting that during this period, Accenture has trailed the S&P 500, which has experienced a substantial increase of 28.3%.

Bryan Keane, the Deutsche Bank analyst who downgraded Accenture, is highly regarded in the industry. WallStreetZen ranks Keane in the top 8% out of 4,586 Wall Street analysts, with an average return of 13.2% and a 65.6% win rate. Keane specializes in the Technology and Financial Services sectors, among others, lending credibility to their assessment of Accenture's current situation.

Accenture plc, a management consulting, technology, and outsourcing services company, serves various industries, including communications, electronics, technology, media, and entertainment. Additionally, Accenture caters to the banking, capital markets, insurance, healthcare, chemicals, energy, forest products, metals and mining, and utilities sectors. Founded in 1989 and headquartered in Dublin, IE, Accenture has established itself as a significant player in the global market.

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