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UBS downgrades stock of a company with 400,000 workers — thanks to ‘significant uncertainty’ from AI

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UBS has downgraded the shares of Teleperformance , which has around 400,000 customer service agents worldwide, over the “significant uncertainty” the company faces from the rise of artificial intelligence. The investment bank downgraded its rating on the stock from “buy” to “neutral,” citing concerns that new AI tools could significantly disrupt the customer experience (CX) industry that the Paris-listed company dominates. The stock has fallen over 50% in the past year to 116 euros ($122) on those fears. UBS also cut its price target for Teleperformance’s stock by 65% to 130 euros per share. The bank’s previous price target was 380 euros per share. The bank now forecasts that Teleperformance’s mid-term revenue growth will be just 4.5%, lower than the 9% annual growth rate it achieved over the past decade. TEP-FR 5Y line The analysts expect AI to enable new low-cost customer service solutions, accelerating the pace of price deflation across the industry. “Given the significant uncertainty about how new AI technologies might impact Teleperformance and the wider outsourced CX industry, we have looked at case studies of previous technology/business model shifts to study the impact on company financials and valuation,” said UBS analysts, led by Nicole Manion, in a Sept. 27 note to clients that justified the downgrade. According to the analysts, it could take several years before the full implications of AI disruption become apparent. They pointed to past cases of disruption, such as digitalization and offshoring, in which valuations remained depressed for long periods unless financial performance improved. However, as an incumbent market leader, Teleperformance should be able to partially offset that impact by embedding AI into its operations to improve employee productivity and offer new services, UBS noted. Taking on board the shifting trend in the sector, the France-headquartered firm last week announced it added generative AI to its analytics platform, “TP Interact.” ” The AI-enriched TP Interact platform allows businesses to gain intelligent insights from customer interactions at scale across multiple languages and multiple channels including voice, chat, email and social media,” the company said in a press release. Analysts at Berenberg are also looking past Teleperformance’s immediate challenges and believe the company will gain from artificial intelligence in the near term. “In our view, Teleperformance’s growth will be affected by the bottom end of the CX market becoming more automated, resulting in lower pricing power, but more complex queries will have a higher price point and therefore a higher margin,” said Berenberg analyst Carl Raynsford in a note to clients on Sept. 27. Raynsford expects shares of the company to rise by 85% over the next 12 months to 211 euros a share.

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