Analysts at Goldman Sachs on Monday weighed in on the Americas IT services sector, launching coverage of eight companies and highlighting “attractive risk/reward profiles” in a report Monday. IBM (NYSE:) and Globant (GLOB). Their note recognizes both cyclical headwinds and long-term potential.
Analysts believe the sector is facing a cyclical downturn due to macroeconomic pressures and a shift in spending towards artificial intelligence-focused capital expenditures. However, they believe that concerns about generative artificial intelligence as a threat to IT services are overblown. Although there are some technical hurdles, AI is ultimately considered beneficial, especially for business process services.
The essence of the note is to distinguish between cyclical and long-term risks. Analysts say the market is bringing these factors together to create opportunities for select companies.
The Goldman Sachs IT Investment Framework evaluates companies’ growth potential, earnings, capital allocation and stock positioning. Buy ratings target companies where the market does not value sustainable growth or potential cyclical recovery.
Based on this framework, Goldman Sachs assigns Buy ratings to shares of IBM with a $200 price target (PT) and Globant with a $200 price target. Conversely, Thoughtworks and TaskUs receive sell ratings with PTs of $2.50 and $12, respectively, reflecting a less favorable risk/return profile. The remaining companies – Accenture, Cignant, EPAM Systems and Softchoice – received a neutral rating.