ExlService Holdings is the IBD Stock Of The Day as it touts a shift in business strategy driving AI-fueled growth. On Wednesday, ExlService stock reversed sharply lower near a buy point amid a broader Fed-induced market reversal.
Analysts moved price targets on EXLS stock sharply higher at the end of October, FactSet shows. That followed an earnings beat-and-raise from the Nvidia artificial intelligence partner.
BPO To AI Play
"The ongoing execution of our data and AI-led strategy enabled us to accelerate our growth," EXL CEO Rohit Kapoor said in an Oct. 29 earnings release.
The New York-based company says it continues to expand from business process outsourcing (BPO) to provider of data analytics, artificial intelligence (AI) and digital solutions. Its roster of partners includes Nvidia, Amazon and other Big Tech names, as well as hot startups like Databricks.
ExlService Stock Finds Key Support Near Buy Point
Shares of ExlService turned lower on the stock market today, shedding 3.1%. EXLS stock had been finding support at its 21-day exponential moving average but undercut that level Wednesday afternoon as the Fed signaled a slower pace of rate cuts.
The AI play showed a 47.37 buy point from a flat base, formed entirely above the 50-day moving average, according to MarketSurge charts. But it neared a test of the 50-day line into Wednesday's close.
Shares closed around 7% below the entry, which marks the Nov. 27 record high.
The relative strength line for ExlService stock has flattened out a bit after surging since June. If the RS line moves to new highs as the AI play tries to break out, it would send a positive signal. A rising RS line means that a stock is outperforming the S&P 500 index. It is the blue line in the chart provided.
ExlService Earnings Acceleration
The IBD Stock Checkup tool shows that ExlService stock earns a near-perfect Composite Rating of 98 out of 99. The rating rolls various fundamental and technical metrics into one easy-to-use score.
Additionally, EXLS shows an RS Rating of 91 and EPS Rating of 95, also out of a best-possible 99.
The company boasts two quarters of accelerating earnings and sales growth.
In Q3, ExlService earnings swelled 19% as revenue rose 15%. Both outpaced views, FactSet shows. The Nvidia AI partner hiked guidance for the full year after delivering double-digit growth in Q3 across its data analytics business and digital operations business.
"As we continue to expand our data modernization and AI solution set with innovations such as industry-specific large language models, we are well positioned to continue our momentum into the fourth quarter and beyond," CEO Kapoor said.
Analysts now forecast that ExlService earnings will increase 14% in 2024 and rise a further 16% in 2025. However, that would be down from more robust growth in the three prior years.
Nvidia AI Underpins New EXL Insurance Product
For Q3, ExlService boasted of 13 client wins. The quarter also saw the launch of the EXL Insurance LLM (large language model), developed using Nvidia artificial intelligence (AI) software, the company said.
Insurance, one of EXL's largest revenue segments, is a big growth driver. The company says its clients include nine of the top 10 U.S. insurers and six of the top 10 U.S. health care payers.
ExlService says it is helping these companies transform their operations using data, analytics and Genai.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
