Last Update 12 Dec 25

TEP: Future Public Sector Wins Will Drive Re Rating Potential

Analysts have significantly reduced their price target on Teleperformance, cutting it from EUR 105 to EUR 70. They have incorporated a slightly lower discount rate, modestly improved long term revenue growth expectations, and a marginally softer profit margin and future P/E outlook into their valuation models.

Analyst Commentary

Following the latest revision, analysts are signaling a more balanced view on Teleperformance, aligning the price target more closely with near term execution risks and a moderated growth outlook. The new target reflects a recalibration of both earnings expectations and valuation multiples, rather than a fundamentally negative shift in the company’s long term prospects.

Bullish Takeaways

Bullish analysts view the reduced price target as resetting expectations to a more achievable level, which can lower the bar for future earnings beats and positive revisions.
The modestly improved long term revenue growth assumptions support a thesis that Teleperformance can still expand its top line through digital customer experience solutions and selective contract wins.
Despite a softer margin outlook, the valuation is seen as more compelling on a risk adjusted basis, with the new target implying upside if management executes on cost discipline and mix improvement.
The maintained Hold stance, rather than a downgrade to Sell, indicates that at current levels the risk reward profile is considered balanced, with potential for re rating if operational delivery stabilizes.

Bearish Takeaways

Bearish analysts highlight that the cut from EUR 105 to EUR 70 represents a meaningful reset of expectations, suggesting that prior assumptions on earnings power and growth were too optimistic.
Concerns persist around margin resilience, with a marginally softer profit outlook implying that wage inflation, contract repricing, or integration costs could weigh on profitability longer than previously expected.
The tempered future P E outlook reflects skepticism that the market will be willing to pay a premium multiple until visibility on organic growth and contract quality improves.
The Hold rating underscores a view that while downside may be more limited after the target cut, catalysts for a rapid recovery in growth or valuation are not yet evident.

What's in the News

Lowered 2025 guidance, now targeting like for like revenue growth of 1.0% to 2.0%, down from the prior 2% to 4% range, reinforcing a slower near term growth profile (Corporate Guidance)
Awarded a place on the UK Crown Commercial Service MYR 6295 framework for both Lot 1 (citizen experience) and Lot 2 (business services), expanding its role in public sector customer and back office services (Client Announcements)
Added to the CAC Next 20 index, signaling continued relevance in the French equity market despite recent volatility (Index Constituent Adds)
Previously removed from another index, highlighting ongoing rebalancing and shifts in benchmark exposure for the stock (Index Constituent Drops)

Valuation Changes

Fair Value: Unchanged at approximately €105.40 per share, indicating no revision to the intrinsic value estimate.
Discount Rate: Fallen slightly from about 9.69% to 9.48%, reflecting a modestly lower perceived risk profile or cost of capital.
Revenue Growth: Risen slightly from roughly 1.66% to 1.68%, signaling a marginally more optimistic long term growth assumption.
Net Profit Margin: Edged down fractionally from about 6.33% to 6.33%, pointing to a very small deterioration in expected profitability.
Future P/E: Decreased slightly from around 11.55x to 11.49x, implying a marginally lower valuation multiple applied to future earnings.

Teleperformance leverages AI, automation, and geographic diversification to drive revenue growth, expand margins, and reduce reliance on slow-growth markets.
Regulatory complexities and temporary headwinds in specialized services position the company to gain market share and rebound earnings as global demand stabilizes.
Persistent contract losses, demand softness, currency headwinds, and rising investment needs threaten revenue growth, margin stability, and competitive positioning amid rapid industry transformation.

Catalysts

About Teleperformance

Operates as a digital business services company in France and internationally.What are the underlying business or industry changes driving this perspective?

The accelerating adoption of AI and digitization is expected to increase enterprise demand for outsourced, omnichannel customer experience solutions; Teleperformance has demonstrated strong momentum in EMEA/APAC core services (nearly 6% growth in Q2), suggesting it is well-positioned to capture wallet-share as clients seek scalable, tech-enabled engagement, likely supporting future revenue growth.
Despite prevailing market fears about automation replacing BPO providers, the company has shown that integration of advanced AI and automation (e.g., 250+ AI projects deployed, operational use of Anna AI in recruitment) is expanding the value chain into higher-value, complex services where human oversight is still crucial-these transformations are anticipated to drive margin expansion and support sustainable earnings growth.
Teleperformance's ongoing geographic diversification, especially successful expansion in emerging and nearshore markets like Africa, Egypt, India, and LATAM, is opening new high-growth revenue streams and mitigating overexposure to slower-growing mature markets, supporting both top-line and margin stability.
The current headwinds in Specialized Services (notably U.S. volume softness and a large contract loss) are largely viewed as temporary, linked to macro/political issues rather than systemic/structural decline; the operational recovery, efficiency measures, and strong historical margins in these business lines provide potential for earnings rebound once demand normalizes.
Increasing regulatory complexity is expected to push global enterprises toward large-scale, compliant partners like Teleperformance; as a global leader with deep investment in compliance and security, the company is likely to gain market share from smaller competitors, supporting long-term revenue and net margin improvement.

Teleperformance Earnings and Revenue Growth

Teleperformance Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Teleperformance's revenue will grow by 2.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.7% today to 6.9% in 3 years time.
Analysts expect earnings to reach €766.6 million (and earnings per share of €13.7) by about September 2028, up from €481.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €683.7 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.4x on those 2028 earnings, up from 7.7x today. This future PE is lower than the current PE for the GB Professional Services industry at 13.7x.
Analysts expect the number of shares outstanding to decline by 0.62% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.18%, as per the Simply Wall St company report.

Teleperformance Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent revenue decline and heightened volatility in Specialized Services, notably due to the loss of major contracts (e.g., TLS/UK visa) and prolonged demand softness in the U.S. LanguageLine business, signal overexposure to maturing or unstable markets, directly threatening future revenue growth and margin stability.
Significant foreign exchange headwinds, with all operating currencies depreciating against the euro for the first time in the company's history, have already compressed reported EBITDA margins and present ongoing risk to future earnings and reported profitability if currency trends persist.
Uncertain and potentially structural weakness in U.S. demand for LanguageLine's interpretation services, exacerbated by the political environment, results in unpredictable customer volumes, which could drive permanent stagnation or contraction in revenue and maintain pressure on margins in a key business line.
Increased investment requirements (AI, acquisitions, cloud, integration expenses) and front-loaded cash outflows have weakened free cash flow generation and led to delays in deleveraging, raising concerns that ongoing OpEx and CapEx needs could pressure net cash flow and limit financial flexibility.
Ongoing industry-wide risks-including rapid AI-driven automation, intensifying global pricing pressure, and regulatory uncertainty-could further erode Teleperformance's competitive advantage, compress gross margins, and reduce return on invested capital unless the company accelerates its pivot to higher-value, technology-enabled services.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €117.733 for Teleperformance based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €195.0, and the most bearish reporting a price target of just €91.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €11.1 billion, earnings will come to €766.6 million, and it would be trading on a PE ratio of 11.4x, assuming you use a discount rate of 9.2%.
Given the current share price of €64.02, the analyst price target of €117.73 is 45.6% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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