On Friday, BMO Capital adjusted its outlook on Telus (NYSE:TU) International (NYSE:TIXT), a provider of IT services and solutions. The firm lowered its price target on the company's stock to $7.50 from the previous target of $9.50. Despite the price target reduction, the analyst maintained a Market Perform rating on the shares.
The revision follows Telus International's recent quarterly financial results, which presented a mixed performance. The company reported lower than expected revenue but exceeded profit forecasts. The profit beat was attributed to a specific business-combination provision.
Looking ahead, Telus International's guidance suggests significant sequential growth throughout the year, with expectations for a substantial increase in growth during the latter half. The company appears to be more optimistic about the macroeconomic environment than its peers, according to the analyst's observations.
However, the firm noted potential risks associated with the company's forward-looking guidance, raising concerns about the aggressive growth trajectory projected by Telus International. The analyst pointed out that, excluding major clients such as the TELUS parent company, Google (NASDAQ:GOOGL), and Facebook (NASDAQ:META), the underlying client growth appears to be weak.
InvestingPro Insights
In light of BMO Capital's recent price target adjustment for Telus International (NYSE:TIXT), examining real-time metrics and InvestingPro Tips can provide additional context for investors. Telus International's market capitalization stands at $1.74 billion, reflecting the size and scale of the company within the IT services sector. The company's revenue growth over the last twelve months as of Q1 2024 was 4.85%, indicating a steady increase in sales. Despite a quarterly revenue decline of 4.23% in Q1 2024, the company's gross profit margin remained healthy at 19.86%, showcasing its ability to maintain profitability.
From the InvestingPro Tips, it is noted that the stock is currently trading near its 52-week low and is considered to be in oversold territory according to the Relative Strength Index (RSI). This suggests that the stock may be undervalued, presenting a potential buying opportunity for investors. Additionally, analysts predict that Telus International will be profitable this year, which aligns with the company's own guidance for significant growth in the latter half of the year. It is important to note that there are 7 additional InvestingPro Tips available for Telus International, which can be accessed for deeper insights.
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