On Monday, Telus (NYSE:TU) International (NYSE:TIXT), a provider of digital customer experience and IT services, had its share price target reduced by Baird from $8.00 to $4.00, while the firm maintained a Neutral rating on the stock.
The adjustment follows a challenging second quarter for the company, during which Telus International reported significant downward revisions to its 2024 guidance.
The company's recent performance has prompted caution from Baird, citing that Telus International is operating near breakeven. The firm's margins have seen a substantial decline, and its leverage is close to 3 times, with potential increases as EBITDA continues to fall. These factors contribute to the firm's cautious stance on the stock.
Telus International's revised guidance for 2024 indicates a roughly 7% decrease in expected revenue at the midpoint. The company's EBITDA forecast has been lowered by 25%, and its earnings per share (EPS) guidance suggests that the second half of the year will yield an EPS of approximately $0.01 to $0.06. This is a stark contrast to the $0.23 core EPS, excluding earnout, reported in the first half of the year.
The revisions come as a result of the company's second-quarter trends, which were described as difficult. The updated forecasts reflect a significant shift in the company's outlook for the coming year.
Investors are advised to take note of these changes as they evaluate Telus International's financial health and future performance. The revised price target and guidance provide insight into the company's current operational and financial challenges.
In other recent news, Telus International faced a downgrade in its stock rating by JPMorgan from Neutral to Underweight, following a quarterly financial performance that fell short of consensus revenue expectations by 2.7%.
The company, however, maintained its fiscal year 2024 guidance. JPMorgan placed Telus International on a Negative Catalyst Watch, indicating a downside risk to the 2024 estimates and guidance due to macroeconomic improvements that have yet to materialize.
BMO Capital and RBC Capital also adjusted their price targets for Telus International. BMO Capital lowered its target to $7.50 from $9.50, while RBC Capital reduced its target to $10 from $11. These adjustments were based on Telus International's recent quarterly financial results, which showed lower than expected revenue but higher profits.
Despite revenue falling short of estimates, RBC Capital maintains a positive outlook on Telus International, while BMO Capital raised concerns about the aggressive growth trajectory and weak client growth excluding major clients. These are some of the recent developments surrounding Telus International.
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