Accenture’s stock price has moved sideways in the past few months, but a recent positive report from Tata Consultancy Services (TCS), a leading Indian competitor, could be a catalyst. This week, it was trading at $350, down 5.18% from its highest level in November last year.
IT spending to increase
Accenture is one of the biggest IT contracting companies in the world, helping thousands of companies and governments implement their strategies. It operates in a highly competitive industry, battling with companies like Tata Consultancy Services (TCS), Cognizant Technologies, and Infosys for contracts.
The past few years have been good for IT contractors as companies have continued to invest in technologies like cloud computing, cybersecurity, and, most recently, artificial intelligence. A report by Gartner estimated that IT spending would grow by 9.3% in 2025 to over $5.7 trillion.
The report identified several sectors where Accenture is strong as areas for strong growth. Data center spending is expected to grow by 15.5% this year to over $367 billion, while software and IT services will jump by 14% and 9.4%, respectively.
Results by Tata Consultancy Services showed that the sector was doing well as its net income jumped by 12% to 123.8 billion rupees, higher than the expected 125.3 billion rupees. Sales jumped by 5.6%, beating analysts estimates. Therefore, these are signs that other IT providers are doing well, which could boost its stock price.
Accenture’s growth has stalled
Signs that the industry is doing well will boost Accenture, whose business has slowed in recent quarters.
Its new bookings for FY’25 were $18.7 billion, a 1% increase from the same period a year earlier. Revenues rose by 9% to $17.7 billion, and its operating margin increased to 16.7%.
Accenture’s business grew modestly across all segments, including consulting and managed services. This growth is due to the technology industry’s generative AI theme.
Accenture expects its second-quarter revenue to be between $16.2 billion and $16.8 billion, a 5% to 9% YoY growth. The firm sees its revenue growing by between 4% and 7% for the year.
Wall Street analysts expect its revenue for the year will be $68.78 billion, a 5.98% increase, followed by $73.40 billion in 2026.
Accenture’s earnings growth is also continuing, with the estimated annual EPS being $12.82, followed by $13.96.
The company has also continued to slash its outstanding share count through robust repurchases. It has reduced its outstanding shares from 635 million in 2021 to 625 million. It spend $898 million in share repurchasing in the last quarter and has $5.9 billion more to buy.
Therefore, a combination of growing EPS, strong dividend performance, growing IT spending, and share repurchases make Accenture a potential good buy this year.
Accenture stock price analysis
The weekly chart shows that the ACN share price has stalled in the past few weeks. However, it has remained above the 50-week moving average and the rising trendline connecting the lowest swings since March 2023.
Most importantly, the stock has formed a bullish pennant chart pattern comprising a vertical line and a triangle. It has also formed a cup and handle pattern. Therefore, this blue-chip stock may soon have a strong bullish breakout, with the initial target being at $380, followed by $390, its 2021 highs.
Such a move will lead to more gains to the next psychological point at $400. Conversely, a drop below the support at $345 will invalidate the bullish view.
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