On Friday, KeyBanc Capital Markets adjusted its outlook on Globant S.A. (NYSE:GLOB), a technology services company, by reducing its price target to $220 from the previous $272. The firm, however, has kept its Overweight rating on the stock. The revision follows the company's first-quarter earnings report for 2024 and a slight decrease in its revenue forecast, which was mainly attributed to foreign exchange (F/X) fluctuations.
Globant reported an organic growth of 12.7% for the quarter, surpassing expectations and showing a slight acceleration from the 12% organic constant currency (CC) growth in the first quarter of 2023. The company's growth was particularly strong in emerging markets, with a 33% organic increase, and Europe, where growth exceeded the company's overall organic growth rate. This performance was noted despite challenges such as a decline in a significant Professional Services client and competitive pricing pressures.
The company's bookings momentum was highlighted, with an increase in larger deals across various sectors such as sports, travel, and financial services, and geographical expansion. The positive booking and revenue trends were seen as a testament to the depth of Globant's offerings and its resilience in a challenging macroeconomic environment.
However, due to the strength of the Mexican and Colombian pesos, which has increased labor costs (representing approximately 31% of the company's workforce), KeyBanc has lowered its earnings per share (EPS) and EBITDA estimates for Globant. This F/X-related headwind has led to the new price target of $220, which is based on 19 times the projected EBITDA for 2024, below the three-year average of 23 times.
Despite these headwinds, KeyBanc remains optimistic about Globant's ability to maintain double-digit organic top-line growth. The firm believes that the company is well-positioned to benefit from ongoing digital growth trends such as customer experience enhancement, artificial intelligence, and digital transformation. Additionally, the shift in demand towards Latin America and India, where Globant has approximately 84% of its workforce, is seen as a positive factor supporting the Overweight rating.
InvestingPro Insights
With KeyBanc Capital Markets adjusting its outlook on Globant S.A. (NYSE:GLOB), investors may find additional context in the company's current financial metrics and market performance. As of the last twelve months ending Q4 2023, Globant's market capitalization stands at $7.67 billion. The company has been trading at a high earnings multiple, with a P/E ratio (adjusted) of 50.66, which suggests investor confidence in future earnings potential despite a high valuation. This aligns with the fact that analysts predict the company will be profitable this year, a continuation of its profitability over the last twelve months.
Revenue growth remains robust at 17.73%, with a gross profit margin of 36.31%, indicating efficient operations and a strong market position. However, the company does not pay a dividend, which may influence investment decisions for income-focused shareholders. For those considering a deeper dive into Globant's financial health and future prospects, InvestingPro offers additional InvestingPro Tips on their platform. There are 9 more tips available that could guide investment strategies, including insights on debt levels and valuation multiples.
For a limited time, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This offer could be particularly valuable for those interested in Globant's next earnings date on May 16, 2024, and how it might affect the company's fair value, currently estimated at $214.96 according to InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.