Hugo Angelo Lucien Manenti
Dear all, I published an updated writeup on $CNXC (Concentrix Corporation) on my substack – link here: hugomanenti.substack.com/p/concentrix-same-old?utm_source=etoro&utm_medium=social Here's the summary. 𝗤𝟭 𝗦𝗻𝗮𝗽𝘀𝗵𝗼𝘁 Revenue of $2.5 billion, up 1.9% in constant currency. Adjusted EPS of $2.61. Both within guidance. Full-year outlook maintained. The stock fell ~20% post-earnings, likely due to inflated sell-side expectations and a back-half-weighted earnings profile. At ~$27 per share, CNXC now trades at 2.2x adjusted earnings and a ~40% free cash flow yield. Incredibly cheap. 𝗧𝗵𝗲 𝗚𝗼𝗼𝗱 The AI story keeps strengthening: ✅ Technology-related wins up 61% YoY ✅ AI-inclusive contract values more than doubled sequentially ✅ Two largest-ever AI deals signed – both with Fortune 50 companies ✅ Proprietary AI product ARR tracking ahead of $100m year-end target Three years after ChatGPT, the "AI will kill call centres" thesis has not materialised. Revenue is growing. The company is winning more business, at increasing quality / stickiness. 𝗧𝗵𝗲 𝗕𝗮𝗱 Margins. Adjusted operating margin at 11.8%, down 180bps year-over-year. The downward trend continues and this is where I've been most wrong – the trough has lasted longer than expected. However, for the first time, management provided a clear bridge to recovery: ~$40m in annualised cost savings, $100-150m of incremental H2 revenue absorbing excess capacity, and transformational deals reaching scale. The CFO guided to "stable Q2, bigger uptick in Q3, further step up in Q4." If Q3 margins don't approach 12.5%+, the investment-phase narrative loses credibility. This is the make-or-break variable. 𝗕𝗼𝘁𝘁𝗼𝗺 𝗟𝗶𝗻𝗲 The thesis is intact but unproven on margins. At this valuation, the stock prices in severe decline while the business is still growing and generating $630m+ of annual FCF. If margins recover, the stock could double. If they don't, the bad news is largely priced in. High conviction, high patience. I remain long. All the best, Hugo
Not investment advice. The author may have financial interests in the mentioned instruments.
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