- Accenture’s acquisition-led GenAI strategy has boosted revenue growth to 4-7%, up from 2-3% previously, but comes with increased debt and interest expenses.
- The company raised $5B in debt to fund acquisitions, increasing its debt load to $8.1B, impacting earnings growth potential, due to the additional $20M per quarter in interest overhead.
- Despite projected 13.1% GAAP operating income growth, higher interest expenses will depress earnings, making the stock fairly valued at a forward PE of ~24x.
- Downgrade to Hold due to balanced growth prospects and valuation concerns amidst increased debt and interest expenses.
Investment Thesis
It takes a lot to stay relevant in today’s business environment of GenAI-led businesses, which is evolving rapidly. With innovation evolving at breakneck speed, companies have attempted to move quickly to match the competitive pace, while others buy their way. Uttam is a growth-oriented investment analyst whose equity research primarily focuses on the technology sector. Semiconductors, Artificial Intelligence and Cloud software are some of the key sectors that are regularly researched and published by him. His research also focuses on other areas such as MedTech, Defense Tech, and Renewable Energy. In addition, Uttam also authors The Pragmatic Optimist Newsletter along with his wife, Amrita Roy, who is also an author on the newsletter as well as on this platform. Their newsletter gets regularly cited by leading publications such as the Wall Street Journal, Forbes, etc. Prior to publishing his research, Uttam worked in Silicon Valley, leading teams for some of the largest technology firms in the world, including Apple and Google.
