UBS raised the target price on Accenture Plc ACN shares by $10 to $125, as it believes the company is poised to continue taking share as clients focus on "The New."
Accenture finished 2016 with a strong 9 percent growth rate in the fourth quarter, led by products (+18 percent). The products section "is expected to remain the strongest vertical in 2017 as digital initiatives remain a key priority."
Digital business grew 30 percent at c/c. This implies 4 percent growth in non-Digital activities and includes $4 billion from other parts of the "New" (cloud and security).
"If Digital grows at 25 percent in 2017, we calculate it would imply just 1 percent growth in non-Digital activities at the high-end of the 5–8 percent range," analyst Michael Briest wrote in a note.
While acknowledging external risks, Accenture set a guidance of 5–8 percent growth and the analyst sees the gap between volume growth and revenue growth potentially narrowing given GDN penetration only rising 200bp through 2016 (to 74 percent).
Briest maintains his Neutral rating on the stock, which closed Thursday's trading at $121.64. At time of publication, Accenture was up 0.68 percent on Friday, trading at $122.45.
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