© Reuters. Best IT Services stocks to Own in 2024 – Guggenheim
IT service providers have been experiencing low demand amid macroeconomic uncertainty, and there are not many stocks in the sector offering near-term upside based on consensus numbers. In this context, Guggenheim analysts shared in a note this week a list of the best IT services stocks to own for 2024.
They noted that weak near-term demand is a result of “deprioritized discretionary spending,” adding that reduced spending is evident “particularly in transformation-oriented discretionary agendas as companies shifted their budget priorities toward optimizing costs dependent on subcontracting.
Despite this, Guggenheim remains constructive on medium-term opportunities, hoping that cyclical headwinds will clear and ai-driven technology will begin to open up new areas of growth.
“We believe we are in the early stages of an ai-driven technology cycle. IT service providers are often the “tip of the spear” of innovation, as those indexed in consulting capabilities help plan, roadmap, develop and implement new technologies for enterprise clients,” they said.
Analysts also expect acquisitions to be key during this phase and are more bullish on stocks that offer growth and exposure to discretionary spending.
The best IT services stocks to own according to Guggenheim are Accenture (NYSE:), Andava Ltd. (DAVA), EPAM Systems (EPAM), and Globant (GLOB). Each of them has a Buy rating on the company, while DAVA is also a “Best Idea.”
“We expect these companies to better capture the secularly driven demand recovery. “Each is also adept at systematic acquisitions, continually shifting capability sets to meet demand,” the analysts said.
Here's why these stocks are buying at Guggenheim.
Accenture (price target: $425): “We view ACN as among the best positioned to capture secular demand themes given its end-to-end service offerings, investments ahead of demand trends, and a durable capital allocation framework.” that balances acquisitions and return for shareholders.”
Andava ($60 price target): The stock “presents a buying opportunity in a high-quality digital-only sector well positioned to benefit from the return of discretionary spending.”
EPAM ($350 price target): “Despite near-term uncertainty, we believe EPAM is among the best positioned to benefit from the demand recovery given its focus on digital enablement.”
Globant (price target $250): “GLOB, a Latin America-based digital-only play that shows resilience amid macroeconomic uncertainty, has demonstrated the strengths and differentiation of its customer relationships and its Studio model, which we believe “It will continue to support double-digit growth in the medium term.”
