Amdocs Limited

DOX Details

Amdocs Limited (NASDAQ: DOX) is a prominent provider of software and services to service providers in the communications, cable and satellite, entertainment, and media industries in developed and developing nations. DOX's product and service solutions are based on a combination of technologies and techniques, including cloud, DevOps, open-source, bimodal operations, Site Reliability Engineering (SRE), and growing degrees of automation using mainstream information technology (IT) tools and artificial intelligence (AI). Its business is conducted internationally, with North America and Europe accounting for the majority of its sales.

New Contracts: On September 13, 2021, DOX stated that it had been chosen by Orange, a French multinational telecommunications firm, to offer business assistance techniques for Europe's first 5G Stand Alone (SA) experimental cloud network established in France.

Concurrently, Vubiquity, a division of DOX, signed a multi-year renewal deal with Izzi, a prominent cable TV operator in Mexico, to supply content licensing and processing for the izziTV service.

9MFY21 Results: The company reported a slight upside of 2.74% in revenues to USD 3.20 billion during 9MFY21 (ended June 30, 2021) compared to USD 3.12 billion during 9MFY20, mainly due to the positive impact from foreign currency movements and developments done by its customers on 5G modernization and the cloud. As a result, DOX reported a significant increase in net income to USD 564.85 million during 9MFY21 vs USD 363.38 million during 9MFY20. As of June 30, 2021, the company's cash balance (including short-term investments) stood at USD 1.05 billion, with total debt of USD 644.41 million. In addition, on August 04, 2021, the company declared a quarterly cash dividend of USD 0.36 per share, payable on October 29, 2021, to shareholders of record on September 30, 2021.

Key Risks: During FY20 and FY19, DOX's one customer amounting to roughly 22% and 16% of its accounts receivables, respectively. Such over-reliance on a single customer might be detrimental to the company's financial health in the long run.

Moreover, the majority of the company's revenue comes from North American regions. As a result, any significant downturn in the economy, regulatory changes, or other factors impacting the region's economic health may negatively impact the company's financial position.

Outlook: DOX indicated in its Q3FY21 earnings report that it anticipates FY21 sales to rise by 2.3 - 3.3% YoY. Its FY21 revenue will reflect the sale of OpenMarket on December 31, 2020, as well as a 1.0% YoY anticipated positive effect from foreign currency changes.

Valuation Methodology: Price/Earnings per share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

DOX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: DOX's share price has surged 34.64% in the past twelve months and is currently leaning towards the higher band of the 52-week range of USD 54.68 to USD 82.38. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 48.08. We have valued the stock using the Price/Earning-based relative valuation methodology and arrived at a target price of USD 71.04. Considering the significant uptick in the stock price, we believe the strong business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 77.00, traded flat as of September 24, 2021, 11:05 AM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV. 

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