Concentrix Corporation (CNXC) has reported recent revenue and earnings that surpassed expectations. The company’s strategic investments in GenAI have started paying off, helping secure large, transformative client wins and setting the stage for further growth in 2025. Despite short-term industry pressures, increasing AI adoption is predicted to benefit customer experience companies in the long run. The stock trades at a discount to industry peers, making it a potentially appealing option for value-oriented investors interested in exposure to the burgeoning adoption of AI technology.
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New Products Harnessing AI
Concentrix Corporation is an international technology and services firm that creates comprehensive solutions tailored to various industries to assist businesses in improving brand experiences and operational efficiencies.
A noteworthy shift is happening in the customer experience (CX) industry sparked by the rise of AI and Generative AI in companies’ strategies for customer engagement. This technological adoption is poised to bring long-term benefits to CX entities. However, it’s expected to create pressure within the sector in the short term.
Concentrix recently announced the release of a new product, iX Hello. Powered by GenAI, this self-service application aims to improve productivity and engagement quality by enabling businesses to develop virtual assistants for a variety of uses, such as data analysis, quick language translations, and self-service chatbots, among many others. The assistants created with iX Hello can integrate with Large Language Models and internal data sources for cost-effective productivity and work quality improvements in a secure and compliant environment.
The company plans to release additional products in the iX suite over the upcoming months. It is providing select organizations with an exclusive look at new technologies before their mass market release. This includes around 40 pre-built virtual agents for appointment booking and order status tracking tasks.
Strong Finish to 2024
Concentrix has reported strong financial performance for the fourth quarter of Fiscal 2024, with a year-over-year increase of 9.7% in revenue of $2.4 billion. Although operating income fell to $144.5 million compared to the prior year’s Q4, the decrease is attributed to costs associated with the commercialization of Concentrix’s new GenAI iX product suite. The non-GAAP EPS of $3.26 beat expectations by $0.25.
For the Fiscal year 2024, revenue increased significantly by 35.2% to $9.6 billion and non-GAAP operating income reached $1.3 billion. Despite a slight decrease in diluted EPS, reaching $3.71 as opposed to $5.70 in the previous fiscal year, the company returned approximately $220 million to its shareholders and reduced debt by nearly $209 million.
The company distributed a quarterly dividend of $1.238 per share, scheduled for payment on February 11, 2025, for shareholders on record as of January 31, 2025. The business bought back 0.7 million shares in Q4, amounting to a total expenditure of $34.0 million, and the company’s Board of Directors increased the limit of the ongoing share repurchase program to $600 million.
Management has issued guidance for the first quarter and full year of Fiscal 2025. Expectations for the first quarter include revenue of $2.35 billion to $2.37 billion, operating profit between $137 million and $147 million, and non-GAAP operating income between $305 million and $315 million. The non-GAAP EPS is predicted to range from $2.49 to $2.64.
For the full year, the company forecasts revenue of $9.47 billion to $9.61 billion, operating income between $663 million and $703 million, while non-GAAP operating income is projected to be between $1,300 million and $1,340 million. The non-GAAP EPS is anticipated to be between $11.18 and $11.77. Finally, the company predicts generating an adjusted free cash flow of approximately $625 million to $650 million for Fiscal year 2025.
Analysts Are Cautiously Constructive
The stock has been on an extended downward trend, shedding over 70% of its value in the past three years. Yet, the stock has shown signs of life recently, climbing over 13% in the past three months. It trades in the lower half of its 52-week price range of $36.28 – $106.10 and shows positive price momentum as it trades above the 20-day (45.62) and 50-day (45.59) moving averages. The stock trades at a discount, with a P/S ratio of 0.34x compared to the Industrials sector average of 1.61x.
Analysts covering the company have been cautiously constructive on CNXC stock. For instance, Canaccord analyst Joseph Vafi reiterated a Buy rating while lowering the price target on the shares to $80 (from $100), noting macro headwinds across the company’s end markets.
Concentrix is rated a Strong Buy overall, based on the recent recommendations of four analysts. The average price target for CNXC stock is $68.25, which represents a potential upside of 35.63% from current levels.
See more CNXC analyst ratings
Closing Thoughts on Concentrix
Concentrix is well-positioned to deliver new technologies driving the future of the customer experience industry. Despite short-term pressures, embracing AI, particularly through Concentrix’s innovative product iX Hello, indicates a promising upside. The stock stands at a relative discount, making it a potentially appealing option for value-oriented investors.
