Morgan Stanley cuts Teleperformance stock rating on automation risks

Morgan Stanley has lowered its rating on Teleperformance stock, citing automation risks and a slowdown in the call-center industry. The firm reduced its price target from EUR61.00 to EUR55.00 and moved Teleperformance from an Equalweight to an Underweight rating. The downgrade stems from a 4.1% year-over-year decline in global call-center employment and T&S volumes, with 25% of the guidance reduction attributed to offshoring, 50% to automation, and the remaining 25% to LLS.

Morgan Stanley anticipates that automation could continue to exert pressure on T&S revenue beyond fiscal 2027 as industry trends dampen confidence in a sustained recovery. The investment bank also noted limited buyback capacity, with substantial repurchases unlikely until fiscal 2029. Teleperformance aims to de-leverage its balance sheet to 1.2x net debt to EBITDA by 2028, up from 2.2x at the start of 2026.

The company offers a 5.4% dividend yield and has paid dividends for 35 consecutive years. Analysts are already forecasting a consensus below the company's mid-term guidance, and Morgan Stanley suggests management may adopt a more conservative growth strategy at its strategic update in the first half of 2027. The stock has experienced a 1.2% decline in Q3 2026 revenue, aligning with the previous quarter's decrease.