Atos shares: Price analysis before buying or selling

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ISIN code: FR0000051732

Ticker: EPA: ATO

Index or market: Euronext Paris

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Elements to consider before selling or buying Atos shares

Analysis N°1

The Atos share price is particularly sensitive to British and North American economic conditions. Therefore closely monitoring the development of the economic health of these two markets is essential.

Analysis N°2

Obviously, all news and announcements about current or future corporate takeover operations will have to be taken into account for their very strong impact on the share price, particularly in the United States.

Analysis N°3

All the strategic plans on which the Atos group is happy to communicate will be excellent indicators and monitoring the final and intermediate results to take a stand and anticipate good trends will be necessary. It's not uncommon for Atos to exceed the objectives set.

Analysis N°4

Finally as indicated above, keeping a close eye on the very strong competition in this sector of activity and on all the important publications from the main competitors of Atos is essential.

Analysis before buying or selling Atos shares

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General presentation of Atos

The Atos Company is a French group specialized in the IT services and consulting sector. It's even one of the worldwide leaders in this field. To better understand the different activities carried out by the group, they can be divided into different categories according to the turnover they generate like this:

First of all, the main activities of the Atos group are linked to outsourcing services for companies. It is the group's primary source of income since these activities alone generate over 56.3% of the group's turnover.
Then come the activities related to systems integration services and consulting services which represent 25.6% of the overall turnover of the company.
Finally, the remaining 18.1% of Atos group turnover stems from transactional service activities. This involves processing electronic payment transactions, the management of remote payments or the development of specific payment solutions.

Also bear in mind that the Atos group is currently developing a new activity focused on the outsourcing of business processes.

The turnover achieved by the Atos group can also be divided according to the target sectors of its activity. As follows, the industry, distribution and transport sector represents around 37.2% of its turnover, the public and health sector represents 28.9% of total turnover, financial services represent 17.9% of turnover and the telecoms and media sector generates 16% of the company's turnover.

From a geographic point of view, Atos is an international company that offers its services all over the world. The turnover generated in France is only 13.6%. Next comes the German market which represents 17.7% of turnover, then North America with 17.6% of turnover, the United Kingdom and Ireland with 13.5% of turnover and the Benelux with 8.5% of turnover. The rest of the world allows the group to generate the remaining 29.1% of turnover.

Photo credits: ©Tobias Arhelger/123RF.COM

The major competitors of Atos

Although Atos is currently one of the leaders in its sector of activity, it also has to contend with a number of major competitors, which we propose to explore in a little more detail here, and which are likely to take market share from it:

IBM

First of all, the International Business Machines Corporation group is a direct competitor of Atos. This American multinational is active in various segments such as computer hardware, software and IT services. The group was created following the merger in 1911 of the Computing Scale Company and the Tabulating Machine Company and is often referred to as 'Big Blue' because of the blue colour that has long been associated with the brand. IBM was the world's largest capitalization in the 1970s and 1980s.

Accenture

The Accenture Group is also a global IT consulting company. Currently, this company employs more than 624,000 people and is present in 120 countries around the world. The Accenture group is organised in a matrix structure with client sectors or operating groups on the one hand and business lines on the other.

Capgemini

This other competitor of Atos is a French digital services company that was founded in 1967 under the name Sogeti. It is the country's largest consulting firm and one of the ten largest in the world. It is listed on the Euronext Paris market and is part of the CAC 40 stock market index. Capgemini is also one of the world's leading providers of consulting, IT and digital transformation services with four business categories including strategy and transformation consulting, application services, technology and engineering services and other outsourcing services. The group currently employs 122,000 people offshore, which is 58% of its total workforce.

Microsoft Corporation

Of course, the American multinational computer and microcomputer company created by Bill Gates and Paul Allen is a direct competitor of Atos. It is still one of the largest market capitalisations on the NASDAQ. The group employs more than 148,000 people and is present in 120 countries around the world. The group's main activity is the development and sale of operating systems, software and related hardware products, but the Microsoft group is also present in other sectors such as the cloud, websites, video game consoles, tablet PCs and in the IT services sector in competition with Atos.

Northrop Grumman Corporation

Finally, the Northorn Grumman Corporation group is an American conglomerate resulting from the merger between Northorn and Grumman in 1994. The group's activities concern the aeronautics and defence sectors with aeronautics, space and electronics as well as associated services. The group is based in Los Angeles and currently employs 97,000 people.

The major partners of Atos

Although knowing the competition of the Atos group is essential before any strategy is put in place on the share price, you should also follow the partnerships and strategic alliances that the group sets up with other companies in order to boost its growth or expansion. To better understand what's interesting about these announcements, here are some recent examples of important partnerships set up by the group.

Google

In April 2018, the Atos group set up a strategic partnership agreement with the web giant Google and its subsidiary Google Cloud as part of its support services for the digital transformation of businesses. The primary objective of this alliance is to create secure solutions in the field of hybrid cloud, data analysis and even machine learning or connected work environment. Atos collaborates with Google Cloud and provides its client companies with innovative and highly secure solutions in these areas. To do so, Atos has planned to launch three research and development centres and innovation laboratories both in Europe and in North America, whose research will be oriented towards machine learning and artificial intelligence. As a result, Google Cloud will become Atos' preferred partner in the public cloud field.

PSA

Also in 2018 but this June, the Atos group gained from a partnership agreement with the French car manufacturer PSA in order to accelerate the latter's digital transformation and integration with Opel- Vauxhall. The agreement will cover an initial period of 7 years and includes in particular the restoration of PSA's IT activities in Argentina with very important stakes for the PSA group. Atos will use its expertise to support French manufacturer in its digital transformation and create even more value on the business value chain. Atos will be particularly in charge of contributing in the development of the manufacturer's range of applications aimed at reducing delays in the availability of new digital applications while lowering maintenance costs.

NATO communications agency

Finally, in October 2018, Atos signed an agreement of the utmost importance with the NATO communication and information agency. The agreement concerns the exchange of information on cybersecurity and cyber threats between the two entities. Through this partnership, both entities will be able to improve their prevention, detection and response capacities to various possible threats. It's essential that the NATO communication and information agency operate and protect the organization's networks and has therefore chosen a new industrial partner with Atos. Atos is not the first IT service company to join NATO with the same agenda since Vodafone or even Thales have also signed similar agreements in the recent past.

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The factors in favour of a rise in the Atos share price:

Of course, the positioning of the Atos company in the IT services market is in itself a strength that it is interesting to discuss here. It should be remembered that the Group is ranked eighth in the world ranking of this sector, which makes it attractive to stock market investors and shareholders.

Another advantage to be highlighted in this value is the division of the Atos Group's activities into different, distinct and rather balanced business units. It should be noted that while the majority of these activities are still in services, which account for 57% of the company's revenues, the Group is also active in other segments such as consulting and systems integration, secure payments and Big Data and cyber security. This varied portfolio of services naturally enables it to diversify its sources of revenue but also to offer a more complete range of services to its customers and prospects.

Atos' business mix and positioning in the different countries in which it operates is still an important asset as it is also very balanced. Atos' strong presence in the United States market is in particular a major advantage in view of the opportunities offered by this sector. This good geographical spread of activities also allows Atos to effectively hedge against the risks of a targeted economic crisis or a decline in demand with revenues coming from various countries.

The Atos Group is also known to analysts and investors for the quality of its expansion and diversification strategy, which is largely based on strategic acquisitions of other companies.

The fact that Atos is increasingly developing its offshore presence is also a rather favourable argument for its growth.

Finally, and to conclude with the advantages and strengths of the Atos Group and its share on the stock market, we can of course underline here the fact that investors and shareholders are strongly reassured by an order book that offers excellent visibility with order amounts exceeding the company's annual revenue. In a more global way, we also appreciate the very good financial situation of the company Atos over the last few years and over the longer term.

The factors in favour of a drop in the Atos share price:

While the Atos Group has many advantages that naturally make its stock market share very attractive to investors, you should also take into account its shortcomings and disadvantages. This is what we propose to do right now with a summary of the main weak points of this group which could therefore hinder its future growth and the rise of its stock market share price.

First of all, and while the division of Atos' activities into different categories has been highlighted as an undeniable advantage, it is regrettable that there are significant differences in the profitability of each division. This glaring imbalance is not improving over time and could have consequences on the overall operating profitability of the Group.

In some specific segments, such as Consulting and Systems Integration, Atos is facing strong competition because it is not able to distinguish itself from its main competitors and therefore lacks competitiveness. This is in addition to another weakness of the Group, which is the overweight of the services business, which has been facing strong pricing pressures in recent years.

Still with regard to the shortcomings of this value, investors also express doubts about the validity of the ramp-up of traditional activities such as infrastructure management and about the capacity for organic revenue growth.

Finally, the fact that the Atos share price is evolving at very high levels that it has not reached since 2014 can be considered by some investors as an important selling signal.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions or a solicitation to buy or sell an asset.

Frequently Asked Questions

How is the capital of the Atos group distributed?

Atos Group's capital is currently held in part by large private shareholders including Siemens Group with 9.96% of the shares, Finsur Corp with 4.23%, The Vanguard Group with 2.21%, Norges Bank Investment Management with 2.15%, Invesco Asset Management with 1.59%, AXA Investment Managers with 1.26%, BlackRock Advisors with 1.23%, ARGA Investment Management with 0.93%, Columbia Management Investment Advisers with 0.95%, and 2.22% employee shareholding

What are the key dates to remember in the history of the Atos Group?

There are several key dates to remember in the history of the Atos Group. First of all, the company was founded in 1997. In 2004, the group acquired the company Schlumberger Sema. In 2011, Atos made another strategic acquisition with SIS from the Siemens group. Finally, in 2014, the group also acquired Bull and Xerox ITO.

How to analyse Atos share charts?

To perform a good graphical and technical analysis of the Atos share price, it is necessary to proceed with the right technical indicators on a customised chart. The various trend and volatility indicators such as the MACD, Bollinger Bands, RSI, stochastic indicators, resistance and support levels and pivot points are all useful.

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Analysis before buying or selling Atos shares