Yahoo Finanza Capgemini Forecast 2020 Revenue Between 12.5% to 14.0%; Target Price EUR 144 in Best-Case
Capgemini, a French-based IT services company, forecast revenue growth at constant exchange rates of between 12.5% to 14.0% this year, largely driven by a recovery in the second half of 2020 and said its revenue in the first half rose over 8%, sending its hares up over 3% on Thursday.
The global leading IT company said its revenues climbed over 8% to EUR 7,581 million in H1 2020 and said the consolidation of Altran had a material impact on Q2 revenues.
The sector and geographic diversification of the client base combined with the high-quality offer portfolio developed in recent years have clearly reinforced the resilience of Capgemini’s revenues. In particular, momentum remains strong for Digital and Cloud services, which increased over 10% in H1, illustrating the structural nature of the demand for these services, the company said.
Capgemini also forecast an operating margin decline of 0.6 to 0.9 points compared to last year’s rate of 12.3%.
Capgemini’s shares closed 0.21% higher at EUR 118.30 on Thursday after rising to a high of EUR 121.65. Also, the stock is up about 9% so far this year.
Executive comments
“We set objectives for 2020 that illustrate the resilience of our revenues, profitability and organic free cash flow. This first half was also marked by the completion of the acquisition of Altran, which brings a new dimension to our Group and a leadership position in the dynamic ‘Intelligent Industry’ market,” Chief Executive Officer Aiman Ezzat said in a statement.
“Finally, I would like to highlight our commitment to tackling climate change, which I have placed at the heart of the Group’s priorities, with our new target of ‘net zero emissions’ by 2030.”
Capgemini stock forecast
Morgan Stanley gave a target price of EUR 100 with a high of EUR 144 under a bull-case scenario and EUR 45 under the worst-case scenario. Deutsche Bank raised their target price to EUR 130 from EUR 104 and HSBC increased their stock price forecast to EUR 110 from EUR 105.
Other equity analysts also recently updated their stock outlook. BofA Global Research raised their price objective to EUR 120 from EUR 112, Kepler Cheuvreux upped their target price to EUR 116 from EUR 103, Citigroup raised it EUR 125 from EUR 120 and Credit Suisse increased their stock price forecast to EUR 150 from EUR 130.
Analyst view
“Focus on FCF generation: Capgemini has historically achieved FCF generation and conversion at some of the higher levels in the sector (conversion typically mid-60s to mid-70s %). We believe the market will continue to view the strong FCF conversion and capital allocation positively,” said Adam Wood, equity analyst at Morgan Stanley.
“Digital manufacturing/Industry 4.0: Capgemini’s recent acquisition of Altran creates an IT/OT leader, well-positioned to capture the large opportunity around digital manufacturing. Strong exposure to digitalisation: Capgemini benefits from an outsized exposure (c. 50%) to digital and cloud, growing c. 15-20%,” he added.
Upside and Downside risks
Upside: 1) Stronger than expected economic recovery following COVID-19. 2) Altran synergies ahead of target- highlighted Morgan Stanley.
Downside: 1) Macro: If confidence rolls over, the shares could move towards our bear case. 2) Contract execution risk is quite high.
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This article was originally posted on FX Empire
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