Maintaining outperform and US$ target of 35$. I'm happy to continue holding.
Mixed quarterly results from Canadian tech company TELUS International (TELUS International Stock Quote, Charts, News, Analysts, Financials NYSE:TIXT) has National Bank Financial analyst lowering his target price on the stock in a Thursday report to clients. Tse said his thesis on TIXT is still intact, however, as the company is well-positioned to benefit from long-term structural trends in the digital customer experience space.
Vancouver-based TELUS International, which offers solutions in areas such as Digital Experience, Customer Experience, IT Lifecycle and Safety and Security, announced its fourth quarter and full-year 2022 financials on Thursday, featuring Q4 revenue up five per cent year-over-year to $630 million and adjusted EBITDA up ten per cent year-over-year to $157 million. Diluted EPS was $0.13 compared to the same a year earlier. (All figures in US dollars.)
Management guided for comparatively lower organic revenue growth in 2023, calling for between ten and 12 per cent growth compared to 16 per cent achieved in 2022 and 15 per cent in 2021. The company did, however, make a major purchase in recent acquisition WillowTree, which will send its revenue to overall a 2023 revenue growth rated of between 20.3 and 22.8 per cent, TELUS International said.
“Recessionary headwinds continued through the fourth quarter, impacting the timing and velocity of new projects, and we expect this dynamic to persist at least in the near term. Despite this, TELUS International has remained resilient, backed by our reputation as a trusted partner and strategic advisor for over 650 global clients,” said President and CEO Jeff Puritt in a press release.
Looking at the results from TIXT, Tse said the $630 million topline was a little under expectations, where his forecast was for $633 million and the consensus estimate was at $634 million. Meanwhile, Adjusted EBITDA at $157 million was slightly ahead of Tse’s call at $155 million and even with the Street at $157 million. Adjusted EPS of $0.35 per share was also a little ahead compared to Tse at $0.34 and the consensus at $0.32 per share.
“Bottom line, while the FQ4 results highlight more cyclicality than traditional IT Services, it does not take away from the positive long-term structural trends,” Tse wrote. “In our opinion, TI remains a name that’s well positioned in the higher relative growth segments of IT services; more specifically, Digital CX, Content Moderation and Data Annotation with optionality through the monetization of advanced technologies like AI.”
Tse maintained an “Outperform” rating on TELUS International while lowering his target price from $38.00 to $35.00 per share, implying at press time a projected return of 63.5 per cent.