Company Reports

Narrow-moat Globant reported fourth-quarter 2023 results that were broadly in line with FactSet consensus. However, guidance for fiscal 2024 was below our forecast and FactSet consensus, which we think caused the shares to close down around 6% on Feb. 16. Weaker-than-expected guidance is due to limited visibility into the second half of fiscal 2024, despite a positive improvement in business conditions. We don’t expect to make a material change to our $201 fair value estimate. At current levels, the shares look fairly valued given the company’s High Morningstar Uncertainty Rating.

We're initiating coverage on two narrow-moat information technology services companies that specialize in digital transformation services. We think narrow-moat Globant is fairly valued with a $201 fair value estimate. In contrast, we think narrow-moat Endava is undervalued with a $77 fair value estimate, which puts the stock in 4-star territory. Endava is enduring a larger growth downturn than Globant in the current challenging environment given its high exposure to private equity, which we think has caused investors with a short investment horizon to sell the stock.

Globant, headquartered in Luxembourg but largely based in Latin America, is an information technology services company focused on providing digital transformation and engineering services. It generates revenue mainly by charging clients on a time and materials basis for services such as consulting/advice, customized software development and integration, and quality assurance and testing. Globant is primarily exposed to the media and entertainment and financial services sectors, which each account for around 20% of revenue.