Beneficiary of the current golden age in tech evolution: Accenture is one of the largest IT consulting and outsourcing services companies in the world that is benefiting substantially from this current tech evolution. It was benefiting from many new secular growth trends prior to the pandemic such as IoT, 5G, artificial intelligence, e-commerce, cloud computing services, business process automation, smart manufacturing and logistics. The pandemic prompted digitalization and and government services which in turn is amplifying demand trends for Accenture. With its broad knowledge across multiple domains, geographical reach and partnerships with global technology vendors, ACN sits in a very strong position to help their clients shorten the learning and adoption curves in the increasingly digitalized global economy.
Investing to stay ahead of the curve is a key pillar of its success and growth strategy: ACN has a strong track record of staying ahead of the technology curve and often invests ahead of time, particularly in emerging technologies. This has enabled it to capitalize on new growth trends and capture market shares from peers. According to IDC, it is the second largest IT consulting company globally after IBM and it continues to gain shares. ACN highlighted its continual spending in acquisitions, R&D, learning and development to strengthen its capabilities and expand into newer service offerings to meet clients' evolving and emerging demands. ACN announced it would invest USD 3 bn over three years in Accenture Cloud First in late 2020. It targets to help its clients adopt a cloud first strategy and accelerate their digital transformation plans.
Growth acceleration drives improved shareholder returns: ACN has emerged as a strong beneficiary of the accelerated pace of digitalization, driven by the pandemic. It quickly identified the surge in demand for cloud service adoption in 2020 and invested aggressively in that segment. This is translating into stronger growth that could sustain over the longer term. With the pace of digitalization remaining strong globally, ACN could sustain a low teens revenue and earnings CAGR. Economies of scale should also drive operating leverage supporting faster earnings growth.
Risks
Market disruptions or unexpected competition could lead to lower growth outlook and share price weakness. Broad slowdown in the global economy could slow customer acquisitions and service adoptions leading to disappointment. Weaker than expected execution, particularly in integrating its acquisitions and extracting synergies could lead to growth disappointments.
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