TLPFF - Teleperformance: We Double Down (Rating Upgrade)

2024-03-12 13:58:22 ET

Summary

• Teleperformance stock experienced a significant loss after Klarna's announcement.
• Artificial intelligence is widely used in Teleperformance solutions. This is an upside and not a downside risk.
• Teleperformance trades with a >+14% free cash flow yield. In addition, there is a 10% buyback yield and a >4.5% dividend yield.
• We believe the company is a screaming buy at this price.

This is the worst performance rating that our team has given in our history with Seeking Alpha (Fig 1). We recently published an initiation of coverage of Teleperformance ( OTCPK:TLPFF , OTCPK:TLPFY ) supported by a tailwind from Artificial Intelligence. Aside from an integration upside on Majorel's acquisition, our investment thesis was based on Teleperformance leveraging GenAI to gain market share, find new revenue lines, and reduce costs (lowering labor costs, preventing churn, and boosting profitability). After three weeks, Klarna released an AI assistant powered by OpenAI with the following key takeaways:

• The AI assistant has had 2.3 million conversations, two-thirds of Klarna's customer service chats, doing the equivalent work of 700 full-time agents;
• It is on par with human agents regarding customer satisfaction scores, with a 25% drop in repeat inquiries;
• Customers now resolve their errands in less than 2 mins compared to 11 mins previously;
• It’s available in 23 markets, 24/7, and communicates in more than 35 languages.

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