TTEC Holdings: I Was Wrong, Sell This Dog

seekingalpha06-26

TTEC stock is downgraded to Sell due to market headwinds, concerns about company performance, and stretched valuation metrics.ARCB stock is upgraded to Hold due to improved market conditions, company ...

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PeopleImages/iStock via Getty Images Summary I apologize for the extended silence. The past few months have been a whirlwind of work and personal commitments, leaving me with less time than usual to devote to in-depth analysis. However, the market never sleeps, and I wanted to provide an update on TTEC Holdings (NASDAQ:TTEC) which I am downgrading to a Sell from a Buy. Reasons To Sell Market Headwinds: I’ll admit I was wrong big time on this one (see original analysis here). But that’s just part of the beast and risk in this game. Even the best stock pickers are right just over half of the time. Since my previous buy recommendation on TTEC, the overall market sentiment has shifted significantly. Growing recessionary fears have made investors more cautious, particularly towards high-growth stocks like TTEC. This shift in risk appetite could negatively impact TTEC's share price in the near term. Company Performance: While TTEC remains a leader in the CX space, recent company updates have raised concerns about its future growth trajectory. Throughout the back half of 2023, earnings estimates were significantly off management’s guide on both the top line and expenses (screenshot below). Lesson learned here, I’d probably discount management guidance estimates going forward as they don't seem reliable. Earnings have been dismal, as I lay out in the 4Q23 results below. These developments suggest that TTEC might face challenges in meeting its previously ambitious growth targets.   4Q23 TTEC Earnings - Actual vs Author Estimates (Author) Valuation Concerns: Despite the recent downturn in its share price, TTEC's valuation continues to appear somewhat inflated. Traditional financial metrics, such as the Price-to-Earnings (P/E) ratio, suggest that the company's stock is still priced relatively high when compared to its industry counterparts. This discrepancy between the stock price and fundamental financial indicators suggests that TTEC may not be an appealing investment option in the prevailing market environment. Investors might view this disparity as a warning sign, indicating that the company's market valuation does not fully reflect its financial health or growth prospects. Consequently, TTEC's current financial position could deter potential investors who are looking for more reasonably priced opportunities within the sector. Competitive Landscape: The customer experience (CX) sector is witnessing a surge in competitiveness as new companies enter the market and existing competitors broaden their service portfolios. This intensifying competition is not only diversifying the choices available to clients but also pushing companies to innovate and improve their offerings continuously. For TTEC, this evolving market landscape poses significant challenges. In addition, the market has speculated on AI being a great force of change on the economics in this space. The general idea being AI, or those CX companies who can effectively harness this technology, will enjoy significant margins compared to the existing model which relies on human capital. If TTEC fails to adapt effectively to these changes, its financial performance and position in the market could be adversely affected in the long term. Based on these factors, we are downgrading our recommendation on TTEC stock from Buy to Sell. The current market environment, coupled with company-specific concerns and a stretched valuation, suggest that investors may be better served by looking elsewhere for growth opportunities. As shown below, I cannot even produce an actual stock price based on my estimates so I'm throwing in the towel on this one.   TTEC Valuation Model (Author)  Upside Risks: In light of my downgrade from Buy to Sell, there remains potential for upside risks that could lead to an increase in its stock price. If TTEC successfully innovates or enhances its service offerings, it could differentiate itself in the competitive CX market, potentially leading to improved market share and revenue growth. Additionally, the market's perception of AI in this space can change from that of a disruptor to TTEC's business model to one that enables it. What I mean by that is if TTEC somehow leverage AI tech to their advantage in future conference and is backed by further strength in the Digital segment, that could be a catalyst for TTEC to rerate higher. Furthermore, external factors such as an overall market upturn or favorable regulatory changes could also boost the stock price. Investors should consider these factors, which might contribute to an unforeseen appreciation in TTEC's stock value despite the current cautious outlook.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.25.0","shortVersion":"4.25.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2446339136"}