(BFM Bourse) – The French digital services company is making significant progress on the Paris Stock Exchange this Tuesday, helped by both a recommendation upgrade from Bank of America and Oracle’s results published the day before.
Capgemini is among the many groups that disappointed during the recent half-year results season. The digital services company was forced, at the end of July, to revise downwards its revenue growth target at constant exchange rates for 2024.
Like many groups in the tech sector, the company headed by Aiman Ezzat has acknowledged the more pronounced slowdown in the economy than expected, with IT spending being highly dependent on macroeconomic developments.
But this Tuesday, Capgemini found its feet on the stock market, gaining 6.6% on the Paris Stock Exchange and recording the biggest increase in the CAC 40.
The digital services company is being buoyed by two boosts. First, Bank of America raised its buy rating on the stock from “neutral,” with the price raised to 250 euros.
The American institution notes that the company’s stock market peers, i.e. American and Indian groups, have been in better shape recently. It also points out that its company’s valuation has returned to long-term lows compared to its listed global rivals. Based on expected profits, Capgemini shares are trading at a 45% discount to Accenture, compared to a historical discount of only 31%.
Second, Capgemini may benefit from a positive market cross-reading following Oracle’s results.
“A major integrator of SAP and Oracle solutions”
The American tech group published its results for the first quarter of its 2024-2025 financial year on Monday evening, the period from June to the end of August. The company’s revenues came to $13.3 billion, up 8% at constant exchange rates, accelerating compared to the 4% growth in the previous quarter. Net income per share came to $1.39.
Analysts had expected revenue of $13.2 billion and earnings of $1.33 per share, according to a consensus cited by Stifel. Oracle shares jumped 8.5% in after-hours trading.
“It should be noted that Capgemini is a major integrator of SAP and Oracle solutions, even if it remains one activity among many others. The fact that demand is picking up at Oracle bodes well for Capgemini and may lead investors to think that the worst may be over,” says a financial intermediary.
“This mainly affects market sentiment. We remember that in June the results of certain groups such as Salesforce weighed on Capgemini. The fact that a large software publisher such as Oracle reassures about its publication can encourage the market to look ahead to 2025 and judge that the 2024 financial year is now ‘risk-free’ after the July warning,” adds a Parisian analyst.
Julien Marion – ©2024 BFM Bourse
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