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.