UBS Downgrades Rating and Cuts Price Target

UBS, an investment bank, has downgraded the shares of Teleperformance, a company with approximately 400,000 customer service agents worldwide. The downgrade is due to the “significant uncertainty” faced by the company from the rise of artificial intelligence (AI). UBS has changed its rating on the stock from “buy” to “neutral” and has reduced its price target for Teleperformance’s stock by 65% to 130 euros per share. This downgrade comes as concerns grow that new AI tools could disrupt the customer experience (CX) industry that Teleperformance dominates. As a result, the stock has fallen over 50% in the past year to 116 euros ($122).

AI Disruption and Potential Impact on Teleperformance

Analysts at UBS predict that AI will enable new low-cost customer service solutions, leading to price deflation across the industry. They believe that it may take several years before the full implications of AI disruption become apparent. UBS points to past cases of disruption, such as digitalization and offshoring, where valuations remained depressed for extended periods unless financial performance improved. However, being an incumbent market leader, Teleperformance can mitigate some of the impact by integrating AI into its operations to enhance employee productivity and offer new services.

Teleperformance’s Response to Changing Trends

In response to the shifting trend in the sector, Teleperformance recently announced the addition of generative AI to its analytics platform, “TP Interact.” This AI-enriched platform allows businesses to gain intelligent insights from customer interactions in multiple languages and across various channels, including voice, chat, email, and social media.

Analysts Remain Optimistic about Teleperformance’s Future

Despite the immediate challenges, analysts at Berenberg believe that Teleperformance will benefit from artificial intelligence in the near term. They anticipate an 85% increase in the company’s shares over the next 12 months to 211 euros per share. While growth may be impacted by the automation of the lower end of the CX market, more complex queries are expected to have a higher price point and margin.