Citi raises Accenture stock target to $430 on potential revenue ramp

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On Friday, Citi updated its assessment of Accenture plc (NYSE:), increasing the price target to $430 from the previous $385, while reiterating a Buy rating on the stock. The adjustment reflects the anticipation of revenue development during the February to May period, which is often critical for IT spending strength each year.

The firm’s analyst highlighted the upcoming fiscal second-quarter earnings call for Accenture, scheduled for March 21st, as a potential indicator of whether a “healthy slope” in revenue growth is achievable, despite current low visibility. The analyst noted that while strategy consulting demand is generally weak, there are exceptions such as in the area of General AI. Furthermore, the demand for small projects has not seen a recovery.

Accenture’s contractual ramps are proceeding, but there is no push for acceleration. The analyst pointed out that Accenture’s initial outlook was set at levels that could be attained without the need for an aggressive ramp-up in business. Additionally, a higher trajectory in mergers and acquisitions is expected to support the lower end of the forecast range.

The report also mentioned that Accenture’s margins and free cash flow (FCF) could benefit from the slower project ramps, providing some control over financial outcomes. The analyst concluded that while Accenture’s stock valuation has increased by 10% since the last earnings report, further positive data would be necessary to justify additional upward movement in the stock’s price.

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