At times, an analyst's price target cut can be a bit deceiving. The move doesn't necessarily mean the pundit has turned bearish on the affected stock. Often, it's more of an adjustment that leaves the basic investment thesis intact.
That was the dynamic behind a recent fair-value assessment chop to storied business consultancy Accenture's (NYSE: ACN) stock by a prognosticator following it.
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As the stock market was about to close for the weekend on Friday last week, Piper Sandler's Arvind Ramnani pulled the lever on his Accenture price target cut. In his opinion, the stock could go to $364, down notably from his previous price target of $396. However, he maintained his buy recommendation. Even at the reduced level, Ramnani is anticipating an upside of 18.3% over the next 12 months from its current price.
Ramnani's revision came one day after the company published its latest set of quarterly earnings, and provided a business update. According to reports, the analyst is concerned with uncertainty about the macroeconomy, as well as a possible decline in Accenture's business with clients in the public sector due to the current, aggressive cost-cutting push by the Trump administration.
Ramnani also wrote that the quarter was a lackluster one for Accenture, with those factors contributing to flat bookings during the period.
The pundit's (somewhat) revised take on Accenture is convincing, given recent developments, although I'm not so sure that I'd be bullish on the stock.
A lot of uncertainty is swirling around our economy now, and the company might not be insulated from much of it. In down times, clients tend to cut their spending on consultancy services, so I don't think the timing is great for Accenture's shares at the moment.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Accenture Plc. The Motley Fool has a disclosure policy.