Accenture stock price dropped after earnings: the case for buying ACN shares

Accenture stock price has had a difficult year as concerns about its business continued. After initially soaring to a high of $392 in January, the ACN stock dropped to the current $270. Its market capitalization has dropped from the year-to-date high of $250 in February to the current $166 billion. 

Accenture stock has faced major headwinds this year

The ACN stock price has come under pressure this year, mirroring the performance of other consulting companies like Tata Consultancy, Cognizant, and Infosys.

Accenture, one of the biggest IT consulting companies, faced headwinds as Elon Musk’s DOGE moved to slash consulting services offered to the Federal government. This is notable as Accenture is one of the biggest companies in the industry and has many contracts with the government.

Most recently, the company’s name was on the list of an X post circulated by the USTR. In it, the agency was warning the EU against its large fines to American technology companies. It hinted that the US would target these European firms in investigations and fines. 

Accenture’s business has slowed this year as companies have moved to save money because of Donald Trump’s tariffs. However, the company is seeing demand as companies from many countries implement artificial intelligence in their operations. It recently partnered with OpenAI and Anthropic, two of the biggest companies in the AI industry.

The most recent results showed that the company’s business was improving. Its new bookings jumped to $20.9 billion, up by 12% from the same period last year, driven by $2.2 billion in fresh bookings from the AI sector. Julie Sweet, the CEO, said:

“We also strengthened our leadership in advanced AI and deepened our ecosystem partnerships to help clients realize value. These results reflect our strategy to be the reinvention partner of choice for our clients.”

Accenture’s revenue rose to $18.7 billion, up by 6% from the same period last year, while its operating margin eased a bit to 15.3%. Its revenue numbers were much better than what analysts were expecting.

The company’s two divisions, consulting and managed services, reported nearly the same numbers. Consulting revenue rose to $9.41 billion, while its managed services rose to $9.33 billion.

Accenture maintained its forward guidance and now expects that its full-year revenue growth will be between 2% and 5% in constant currency.

The bullish case for ACN

There are a few reasons why the Accenture stock price may continue doing well in the coming months.

First, the company’s business is doing well despite the ongoing challenges. Its recent results and analyst guidance evidences this. 

Analysts expect that the second quarter revenue will be $17.79 billion, up by 6.79% from the same period last year. Its annual revenue in the next two financial years will be $73.64 billion and $77.68 billion, respectively. The average stock target among analysts is $288, with Morgan Stanley boosting the target to $320. zzz

Second, the company will benefit as companies across all sectors continue increasing their investments in the AI industry. This growth could mirror what happened during the implementation of cloud computing technology.

Third, the company has become a bargain. It has a forward PE ratio of 19.8, lower than the sector median of 23 and its five-year average of 27.

Finally, the fears of reduced government spending have been exaggerated, meaning that the company will likely continue receiving more contracts in the near future.

Accenture share price technical analysis 

The daily timeframe chart shows that the ACN stock price has rebounded from the year-to-date low of $225 to the current $270. It has moved above the 23.6% Fibonacci Retracement level at $265.

The stock has also formed a small inverted head-and-shoulders pattern, which is one of the most popular bullish reversal signs. It has also moved above the 50-day Exponential Moving Average.

Therefore, the most likely scenario is where the stock continues rising, with the next key target being at $308, the 50% Fibonacci Retracement level, which is about 14.65% above the current level.

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