When CEO Daniel Julien took the stage in New York for the pivotal investor relationship day in June, he knew he had a high interest. Julian's company, France's outsourcing giant telepelforming has lost more than 75% of its value from its 2022 high. He was tasked with convincing the audience, the investors and Wall Street analysts, that they misunderstood the business. He and other telepelforming executives spent the next three and a half hours, and AI cited “AI” more than 75 times to explain that AI is essential to the future of telepelformance. Teleperformance operates call centers and other business process outsourcing services. It is one of the world's largest employers, with nearly half a million workers worldwide. Julian's plans were detailed and the target was ambitious, but the market verdict was quick and brutal. The outsourcing company's shares fell 14% after Capital Market Day on June 18th, after laying out a new AI-centric strategy. Over the next few days, the slides continued, wiping out almost a fifth of the company's value. TEP-FR 1Y Mountain Seloff highlighted market questions about the future of companies in an automated world despite Julian's best efforts. Investment banks say generative AI can pose both a major threat and opportunity for telepel-formance. CAC 40 Company executives plan in detail to expand their core business with AI and set long-term financial goals. The company covers an annual revenue growth rate of 4% to 6% by 2028, an adjusted profit margin of approximately 15.5%, and a cumulative net free cash flow (FCF) of approximately 3 billion euros ($3.5 billion) from 2026 to 2028. The Bears' Cases on Wall Street did little to reassure them about their business model under siege. Investors are worried about AI deflationary pressure. As automated systems handle more customer interactions, the value of traditional human-driven services, especially in low-cost offshore locations, is under pressure. This is already beginning to appear. In 2024, the company's “Core Services” division saw a 10% decrease in adjusted profit margins year on year, with only 1.4% growth, excluding one-time profits and expenses. “We are skeptical since 2025. The company is likely to continue deflation from offshore, so it can meet consensus expectations. Automation-related deflation is set to accelerate. But bullish analysts on the “buy” side say the sale is a significant overreaction and creates persuasive investment opportunities. For them, the market is priced in the worst-case scenario, ignoring the company's ability to pivot and its financial strength. Founded by Julien, the 47-year-old company doubled its revenues to more than 10 billion euros in 2024. According to FactSet data, it is listed in more than 1 billion euros of cash in your bank account. Belenberg analysts with a Telepelforming purchase rating say it is “effectively undervalued in 4x EBITDA,” a adjusted profit metric. Bank of America also called its rating “attractive” and pointed out its shareholder-friendly capital return policy. Even some more cautious analysts have admitted a lower rating. However, almost everyone pointed to the lack of short-term guidance in the beginning of heavy investments in AI as the reason behind the stock. “In our view, this is due to the company's emphasis on heavy opex and CAPEX investments in AI in the short term, alongside the growth of the hockey stick trajectory in 2028,” Belenburg analyst Carl Raysford notes to his client on June 20th. By 2028 it will appear “overly cautious” of free cash flow. These analysts believe the market misinterprets the company's AI investment. “We like the strategy,” said Simonasarli, an analyst at Bank of America. “The company aims to expand into high-growth back-office solutions and reposition the customer experiences delivered to high-value tasks through targeted AI investments.” Complicating peer reviews is an inexplicable contradiction about how the market deals with telepelle format compared to peers. Analysts at RBC Capital Markets emphasize that investors will be “rewarded” by Concerix, a peer listed on NASDAQ for their AI strategy, removing telepel format equivalent to “value destruction exercises.” RBC noted that Concentix has grown by nearly 40% since the start of the year, while Teleper Formons has risen just 8% along the French CAC 40 index. The TEP-FR CNXC YTD line also points to a survey commissioned by Constarix, which showed that 85% of large companies expect to increase their outsourcing budgets over the next two to three years. Scotiabank repeated the sentiment of the sector. “Based on ongoing discussions with the global [customer experience (CX)] The company believes that, contrary to investor concerns, the revenue landscape of CX companies has not been shrinking,” Scottiabank's Diviya Goyal said in a note to client. As new technology is introduced into the market, the outsourcing trends will increase, ultimately benefiting established CX players. “Capgemini's WNS acquisition provided strong data points on July 7th, just as investors were weighing Telepel Formation's AI strategy. Space agreed to pay a 17% premium on 15x previous revenues with $3.3 billion in cash, said TD Cowen analyst Brian Belgine. “Show Me Story”[Teleperformance’s (TP)] New growth strategies need to prove that AI can drive sufficient growth and new sustainable revenue streams to offset headwinds from the full automation of some services. In a note to Clients, UBS analyst Nicole Manion said. Sarli says the company has failed to close investors who can ride a roller coaster for the next few years. Teleperformance did not respond to requests for comment from CNBC.
