Accenture Slips As Goldman Says Sell, Oracle Says Not Buying
Shares of Accenture (ACN) are sliding after Goldman Sachs analyst James Schneider downgraded the stock to Sell as he believes the company's revenue growth will slow further given its exposure to digital applications work. Meanwhile, Oracle (ORCL) has denied rumors that it had looked to possibly buy the company.
GOLDMAN SAYS SELL ACCENTURE: In a research note this morning, Goldman Sachs' Schneider downgraded Accenture to Sell from Neutral and lowered his price target to $110 from $125 as he expects the stock to underperform the market in the coming years, according to his new IT Services framework, the Digital Life Cycle, that uses proprietary data points to predict how the industry transition to SaaS and cloud infrastructure will impact future industry growth rates. The analyst told investors that he thinks Accenture's consulting growth will slow through 2018, driven by slowing digital growth and faster legacy erosion. Additionally, Schneider noted that he expects outsourcing growth will also slow in 2017, and foresees competitive pressure from IBM (IBM) and DXC Technology (DXC) to intensity. Given a 95% correlation between growth and multiple, the analyst said he expects Accenture's premium to narrow, he added.
ORACLE REJECTS TAKEOVER RUMOR: Last week, a report from the U.K.'s Register, an IT focused blog, claimed that Oracle was exploring a potential acquisition of Accenture. According to The Register, the former had engaged a team of consultants to conduct due diligence to "explore the synergies" possible if the company bought Accenture "lock stock and barrel." However, Oracle has since rejected the rumors, according to an article by Fortune that was published yesterday. "The Accenture rumor is completely untrue. Never even considered it," a spokesperson told Fortune.
WHAT'S NOTABLE: Accenture announced this morning that it has completed its acquisition of the iDefense Security Intelligence Services business from VeriSign (VRSN). Furthermore, the company has also acquired Genfour, a pure play automation service provider with deep domain expertise and industry experience in assessing, implementing and managing automation solutions. The acquisition is expected to strengthen Accenture's capabilities as a provider of intelligent automation services.
PRICE ACTION: In morning trading, shares of Accenture have dropped almost 2% to $117.66, while Oracle's stock has gained about 0.5% to $44.84.
Disclosure: None.