Today, there are great news for tech consulting firms. Investment bank Jefferies has indicated that investment in tech consulting will resume soon, and we can expect good quarters and a promising future for these companies that have struggled recently. Investment and growth are returning. Specifically, Jefferies has highlighted $EPAM (EPAM Systems Inc.) , a company we've discussed a lot on this channel, stating that it might start recovering again. They have raised their price target and upgraded their recommendation to "buy".
They expect artificial intelligence, which has seen significant growth in many companies, to be positive for tech consulting firms like EPAM, $ACN (Accenture PLC) and $GLOB (Globant SA) . These businesses help other companies digitize their operations, and AI will be crucial in many areas and industries, driving demand for the services of companies like EPAM.
Today, EPAM's stock jumped nearly 5% on this news, rebounding from recent lows. Historically, the best time to buy a company is when it's at its worst, provided the business recovers and performs well afterward. EPAM has been growing for the last 10 years, with strong financials and a solid track record in software design.
Despite recent challenges due to the Ukraine conflict, where they had significant operations, and a slowdown in the sector during late 2023 and early 2024, Jefferies believes the worst is over, and EPAM and other consulting firms could start an upward trend. Their financials show a decline in sales and operating profits in 2023 and early 2024, but Jefferies expects a bottom soon, followed by growth.
For 2024, EPAM might end the year negatively but is expected to grow in 2025 and beyond, with projected sales increases of 8% and steady profit growth. Tech consulting firms are expected to benefit from the ongoing digital transformation and AI adoption.
EPAM's valuation is attractive, trading at 20-22 times earnings, below the historical median of 25. Despite some stock buybacks, the shares in circulation haven't decreased much, indicating they might be issuing shares as well. EPAM's financial position is strong, with no debt and significant cash reserves, allowing for continued investment and potential further stock buybacks.
The video also discusses other consulting firms like Globant, Accenture, CGI, and HPAC, which have seen recent stock price increases. The recommendation is to have a diversified portfolio, ideally with 20-35 different companies to mitigate risk.
In conclusion, EPAM and similar firms have a bright future if they continue to grow their profits and sales, benefiting from the increasing demand for tech consulting and AI services.... Show More
