Morgan Stanley upgraded Capgemini to 'equal-weight' from 'underweight' on Thursday, citing that a 26% year-to-date decline has brought the stock's risk-reward balance to a more attractive position. The French IT services company has become the worst performer in Morgan Stanley's European IT services coverage, which itself is down about 14% over the same period. Despite the rating change, Morgan Stanley cut its price target to €117 from €142, reflecting a higher WACC of 9.5% and low visibility into Capgemini's medium-term growth trajectory amid potential AI disruption.

The stock's decline has compressed Capgemini's NTM P/E multiple from about 11x at the start of 2026 to approximately 8x, not far above its 20-year low of about 6.7x recorded during the 2008-09 financial crisis. While CEO Aiman Ezzat noted that the IT spending environment remains 'not the most stable,' Morgan Stanley expects neither a V-shaped recovery nor significant near-term downside to growth. The brokerage's base case forecasts about 3% organic revenue growth annually through FY29, below the Visible Alpha median consensus of 3.5% to 4.5%.

Capgemini's FY25 results introduced a €700 million restructuring program called 'Fit for Growth' over two years, targeting workforce and cost realignment. Morgan Stanley views this restructuring size as 'not indicative of a company that is seeing significant near-term growth opportunities,' and expects the charges to weigh on free cash flow in FY26 and FY27, leading to cuts in FCF forecasts by about 7% for FY26 and 12% for FY27.