Capgemini: Credit Suisse raises target price
(CercleFinance.com) - Crédit Suisse has increased its target price for the Capgemini share, now looking for 121 euros (vs.
108 euros), while confirming its outperform rating.
"The risk to our target price is that the Covid-19 disruption is greater than expected, but this risk is not isolated to Capgemini and shouldn't justify the current relative valuation discount in our view".
"IT services are cyclical and it is inevitable that global macroeconomic uncertainty will weigh on the outlook. Significantly, we see limited operational risks as the IT services business model has evolved to accommodate offshore working," Crédit Suisse says.
"Consequently, the current remote access/ home working environment still enables services to be delivered to customers".
"That said, customer demand will clearly come under pressure and put pressure on future revenues. At Capgemini, rather than c2% growth and flat margins, we now assume c-4% growth and 70bps of margin compression. We assume that Altran is more cyclical than Capgemini and that revenues fall 6% and margins compress by 100bps," it adds.
"Lower revenue and margin assumptions mean that EBITA forecasts are now c10% lower".
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The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
108 euros), while confirming its outperform rating.
"The risk to our target price is that the Covid-19 disruption is greater than expected, but this risk is not isolated to Capgemini and shouldn't justify the current relative valuation discount in our view".
"IT services are cyclical and it is inevitable that global macroeconomic uncertainty will weigh on the outlook. Significantly, we see limited operational risks as the IT services business model has evolved to accommodate offshore working," Crédit Suisse says.
"Consequently, the current remote access/ home working environment still enables services to be delivered to customers".
"That said, customer demand will clearly come under pressure and put pressure on future revenues. At Capgemini, rather than c2% growth and flat margins, we now assume c-4% growth and 70bps of margin compression. We assume that Altran is more cyclical than Capgemini and that revenues fall 6% and margins compress by 100bps," it adds.
"Lower revenue and margin assumptions mean that EBITA forecasts are now c10% lower".
Copyright (c) 2020 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.