CA - Telus cut to Equal Weight at Barclays on uncertain macro
2023-07-17 09:38:08 ET
Telus International (Cda) ( NYSE: TIXT ) was downgraded by Barclays Capital to Equal Weight from Overweight due to uncertain macro and limited visibility as the technology sector continues to retrench.
Barclays analysts said that Telus reported preliminary Q2 results which were below expectations and provided an updated FY23 guidance.
On Thursday, the company said it expects Q2 revenue to be in the range of $660M to $668M, reflecting a growth of 6% to 7% Y/Y, due to lower than expected business volumes. Telus also revised its full-year outlook, citing macroeconomic conditions and lower demand. The company's shares had slumped -31.34% on Friday, following the announcement.
The analysts noted that Telus' management cited pronounced and unexpected reductions in service demand from a few large clients within the Technology vertical, and delays and lower-than-expected bookings conversions. In addition, Telus pointed to pressure in Europe as certain labor regulations have prevented the company from relocating headcount in order to optimize utilization.
The analysts said that while Telus pointed to opportunities for digital transformation, generative AI adoption and digital CX, they think that the current environment will continue to pressure deal flow and bookings conversion. Simultaneously, macro/cyclical pressure has caused visibility around the sales pipeline and revenue results to decline quite a bit.
The firm does not expect Telus' key end markets to re-accelerate until the macro picture becomes clearer, which could take some time.
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Telus cut to Equal Weight at Barclays on uncertain macro