Accenture, EPAM Systems, Globant among those initiated at Guggenheim

Accenture (NYSE:ACN), EPAM Systems (EPAM) and Globant (GLOB) are among the IT service providers getting new coverage at Guggenheim.

The investment firm put Buy ratings on Accenture, Endava (DAVA), EPAM Systems and Globant, while it slapped Neutral ratings on Cognizant Technology Solutions (CTSH), DXC Technology (DXC), Infosys (INFY), Perficient (PRFT), TaskUs (TASK) and Telus International (TIXT).

TTEC Holdings (TTEC) was the lone company given a Sell rating.

"A muted demand backdrop for late-cycle IT Services providers, underpinned by ongoing macroeconomic uncertainty, leaves us cautious on potential for near-term upside to consensus estimates, with cyclical forces continuing to overtake secular opportunities," analyst Jonathan Lee wrote in an investor note.

"However, an eventual reversion away from cost optimization initiatives toward addressing transformational agendas— fueled, in part, by artificial-intelligence-related workstreams—drives our preference for growth, given medium-term opportunities for secular tailwinds."

In the near-term, demand is likely to be "soft" as discretionary spending is cut, but the medium-term is when certain "secular tailwinds" such as artificial intelligence, should emerge, Lee said.

"We believe we are in the early innings of an AI-driven technology cycle," Lee wrote. "IT Services providers are often 'tip of spear' for innovation, as those indexed to consulting capabilities help plan, roadmap, develop, and implement new technology for enterprise customers. Adept at recruiting and upskilling engineers, as well as staying abreast on emerging technology, IT Services companies with strong talent pools should be able to capture a meaningful portion of global spending on AI software and platforms, estimated to grow to $251bn by 2027 (per IDC)."