Globant Well-Positioned For Best-In-Breed Organic Growth And Margin Profile, Says Analyst

Needham analyst Mayank Tandon initiates coverage on Globant SA GLOB with a Buy rating and a price target of $205.
The analyst believes Globant's focus on high-end digital services should allow it to generate best-in-breed organic growth while maintaining an attractive margin profile, supporting its premium valuation to the broader group.
Globant can generate 20%+ organic growth over the medium term, given the massive market opportunity for digital transformation services, which is projected to be a $3.4 trillion market by 2026.
The company will be able to continue growing above market through organic hiring initiatives, new customers, and expanding relationships with existing customers.
The analyst also applauds the company's well-stocked balance sheet, which has $337 million in net cash that will drive growth through organic initiatives and a targeted M&A strategy.
Given these factors, Needham expects 16% revenue growth in FY23, which includes a 4% lift from M&A activities. The company's sales grew 37.3% year over year to $1.78 billion in FY22.
Earnings per share are expected to soar by 13% in FY23 and 22% in FY24.
However, the analyst expects modest gross margin contraction in FY23 as Globant is ramping up hiring activity and training initiatives to remain competitive.
The company's operating income margins are expected to be 16.3% in FY23 and 16.5% in FY24.
Price Action: GLOB shares are trading higher by 1.5% at $159.34 on the last check Wednesday.