Oppenheimer Raises Target Price for Amdocs Stock Despite Slight Revenue Forecast Reduction

Oppenheimer, known for its strong research department, has maintained an "outperform" recommendation for Amdocs (DOX) stock while raising its target price from $99 to $109. The decision comes after Amdocs posted strong fiscal third-quarter results, showcasing annual revenue growth of 6.9% at constant exchange rates. Although the growth rate slightly decelerated compared to the previous quarter, the company remains strategically well-positioned in the cloud services sector, particularly among leading telecom companies undergoing digital transformation.

Amdocs management has updated its fiscal year 2023 forecasts, adjusting the revenue growth range to 7.2%-8% at constant exchange rates (equivalent to 6.3%-7.1% growth in dollar terms). Furthermore, the earnings per share growth forecast range has been revised to 11%-12%, reflecting a reduction from the previous 9%-13% range. The adjustments were made in response to uncertainties in the macro sector.

Despite the updated annual forecast, Oppenheimer analysts remain optimistic about Amdocs' prospects, especially as it continues to support major players in the telecom industry, including AT&T and T-Mobile, which together account for approximately half of the company's revenues. Additionally, Amdocs reported a positive cash flow from current operations of $173 million and free cash flow of $144 million in the fiscal third quarter, indicating robust financial performance.

Geographically, North America constitutes 67% of Amdocs' total revenue, with Europe contributing 15% and the rest of the world accounting for 18% of the sales mix. The company's order backlog has increased to $4.14 billion, signifying a 5% annual growth at constant exchange rates.

Despite the challenges posed by uncertainties in the macro sector, Oppenheimer believes that Amdocs is well-positioned for continued growth, improved profitability, and strong cash flow generation. As a result, they maintain their "outperform" recommendation for DOX shares and raise the target price based on a multiple of 16 for the profit forecast for the fiscal year 2024.

Amdocs' stock also enjoys recognition on the "Israelist" recommended list, further bolstering confidence in the company's future performance.

Investors will keep a close eye on Amdocs' progress in the cloud services sector and its continued collaboration with telecom giants as the company navigates the uncertain macroeconomic landscape. With Oppenheimer's favorable outlook, shareholders and potential investors may find this an opportune moment to consider Amdocs as part of their investment portfolio.