Should you buy Accenture shares in August as it acquires LEXTA?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Aug 2, 2021
  • Accenture is buying IT benchmarking and IT sourcing advisory firm LEXTA.
  • The purchase comes just days after buying the Italian e-commerce agency Openmind.
  • ACN shares traded flat Monday morning despite the news: should you buy now?

Accenture Plc (NYSE:ACN) has agreed to buy the German-based IT benchmarking and consulting firm LEXTA. The purchase comes days after the company purchased the Italy-based e-commerce agency Openmind.

The LEXTA acquisition will help Accenture upgrade its capabilities in IT benchmarking and sourcing while Openmind to help clients re-invent online commerce experiences. The Ireland-based professional consulting services provider wants to expand its business verticals while at the same time creating operational synergies.

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Openmind’s multi-channel solutions will play a strategic role in improving Accenture Interactive’s seamless cloud-based e-commerce services. On the other hand, LEXTA’s cloud benchmarking solutions will help clients make better-informed decisions.

Accenture wrote in the acquisition statement:

Combining LEXTA’s data-based analysis capability and Accenture’s technology advisory skills, we will further develop our joint IT sourcing and benchmarking advisory offering to ultimately realize new value for our clients.

Should you invest in Accenture shares now?

From a valuation perspective, Accenture shares appear to be fairly valued at a P/E ratio of 35.50. Furthermore, the forward P/E ratio of 32.23 also suggests a less upward potential for value investors to target. 

Furthermore, Accenture’s earnings growth expectations of 7.30% this year and 11.92% next year are not compelling enough for aggressive growth investors. However, the average annual growth of about 11.80 is potentially conservative given Accenture’s recent acquisitions.

Therefore, although ACN shares are not ideal for value investors now, they could be attractive to long-term growth investors.

Source – TradingView

Technical overview: ACN stock price prediction for Q3 2021

Technically, Accenture shares appear to be trading within an ascending channel formation in the daily chart. The stock recently rallied to a new all-time high of $321 before pulling back to $318.27. In addition, it still trades very close to overbought conditions in the 14-day RSI, creating a perfect opportunity for a downward movement.

Therefore, investors will target extended pullback profits at approximately $307.07 or lower at $294.44. The key resistance levels are $329.13 and $340.90.

Bottom line: the case for selling Accenture stock now

Although Accenture is making strategic acquisitions to boost future growth, the short-term outlook seems to favor the bears. The stock has recently rallied to new all-time highs, and the pullback appears to have more room to run. Therefore, investors can target pullback profits or wait for the stock to fall further before buying.

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