Bank of America analysts painted an optimistic picture for a handful of European technology stocks, forecasting an acceleration in growth in the second half of the year. Despite a challenging earnings season and mixed second-quarter results – which contributed to European tech stocks’ 10% decline since mid-July – the bank sees potential for acceleration in critical areas of the industry. .STOXX 1Y Line The European technology sector has seen significant fluctuations this year, with performance across individual companies varying widely. While some firms, such as SAP, have posted sizeable gains of nearly 45%, others, such as Capgemini, have struggled. However, Bank of America remains optimistic, particularly on software, IT services and payments. “We expect (revenue) growth to accelerate over the remainder of the year, with growth of 5.5% in (H2) versus 5.0% in (H1), driven by an ongoing recovery in the IT services sector, which bottomed out at -2.7% organic growth in (Q1) and ended the year with +0.7% growth in (Q4) as discretionary spending recovers,” Bank of America analysts led by Frederic Boulan said in a research note to clients titled “Year-end outlook: Re-acceleration is imminent” on August 27. The bank’s analysts said that in their second-quarter results, companies disclosed numerous challenges facing the sector, including slowing demand and longer sales cycles in some areas, ongoing efforts to monetize artificial intelligence technologies and a widespread focus on cost efficiency and margin expansion. Despite these challenges, Bank of America sees reason for optimism and named several stocks that it believes are well positioned to benefit from this expected reacceleration. All of these stocks are also traded in the US. In the software sector, Bank of America reiterated its buy recommendations for SAP, Sage and Dassault Systemes. In IT services, it favors Sopra Steria, NetCompany and Alten. In the payments space, its top picks include Adyen, Nexi, Wise and Worldline. According to the investment bank, artificial intelligence is emerging as a significant factor in the technology sector’s growth prospects. While many companies are still in the early stages of monetizing AI technologies, Bank of America analysts see it as a potential catalyst for future investments. SAP, for example, plans to double its AI use cases from over 100 today to around 200 by the end of 2024, according to the Wall Street bank. The bank’s analysts see great potential in the cloud computing sector, particularly as a beneficiary of AI-driven demand. BofA estimates that cloud industry revenues will grow 26% in 2024, with this figure accelerating further from 22% in 2023.
