TCS stock jumps over 1% today after Q1 net profit rises nearly 17%; Should you buy, sell Tata Consultancy shares?
The share price of Tata Consultancy Services (TCS) experienced a 1.62% increase, reaching Rs 3314.05, following the announcement of the company’s financial results for the quarter ended June 30, 2023. TCS, a leading IT major, reported a 16.8% year-on-year growth in net profit, driven by robust growth in total contract value (TCV) deal wins, despite a challenging business environment.
The company’s consolidated revenue for the quarter amounted to Rs 59,381 crore, reflecting a 13% increase compared to the previous year. The strong financial performance indicates TCS’s ability to navigate the prevailing market conditions and capitalize on business opportunities.
Investors responded positively to the news, as the TCS stock has witnessed a gain of 2.4% in the past month and over 9% in the last year. The consistent growth and favourable financial results have likely contributed to investor confidence in the company’s prospects.
TCS’s strong performance in net profit and revenue can be attributed to its successful deal wins and execution of projects. The company’s ability to secure new contracts and drive growth amid a challenging business environment highlights its competitive strength and adaptability.
The buoyant stock performance reflects market optimism towards TCS and its position in the IT industry. As a leading player in the sector, TCS’s financial results and market performance are closely monitored by investors and industry observers alike.
It is important to note that stock prices are subject to market fluctuations and various external factors, and investors should exercise caution and conduct thorough analysis before making any investment decisions.
Overall, the rise in TCS’s share price following the announcement of its financial results for the quarter reflects the market’s positive response to the company’s growth in net profit and revenue. The strong performance showcases TCS’s resilience and ability to navigate the evolving business landscape in the IT industry.
According to analysts at HDFC Securities, Tata Consultancy Services (TCS) they delivered a performance in line with expectations in the first quarter (Q1), although the sequential revenue growth remained flat. The company recorded strong deal bookings, providing visibility despite challenging macroeconomic conditions.
The flat sequential revenue growth was influenced by weakness observed across verticals, including BFSI (Banking, Financial Services, and Insurance), Communication & Media, and Technology & Services, which collectively contributed 46% of TCS’s revenue and declined by 1% quarter-on-quarter (QoQ). However, the remaining business segments exhibited growth of 1.6% QoQ.
HDFC Securities analysts maintain an “ADD” (accumulate) rating on TCS shares and have set a target price of Rs 3,710. Their target price is based on a multiple of 26 times the projected earnings per share (EPS) for June 2025, with an EPS compound annual growth rate (CAGR) of 10% from FY23 to FY26.
It is essential to consider that analysts’ views and target prices are based on their assessment of the company’s performance, industry trends, and other relevant factors. Investors should conduct their own research and analysis before making any investment decisions.
The mention of strong deal bookings providing visibility suggests that TCS’s ability to secure new contracts and maintain a robust pipeline of projects bodes well for its future growth prospects. However, the impact of the flat sequential revenue growth in certain verticals is worth monitoring, as it may indicate specific challenges within those sectors.
Overall, the analysts’ outlook suggests a cautious but positive sentiment towards TCS, acknowledging the company’s solid deal bookings despite the challenging macroeconomic environment. Investors should consider multiple sources of information and conduct a thorough analysis to make informed investment decisions.
According to analysts at Motilal Oswal, Tata Consultancy Services (TCS) is expected to deliver superior growth in the near term compared to other companies in their Tier 1 coverage. This projection is based on TCS’s leadership in cost-efficiency projects, which has resulted in strong inflows over the last two quarters.
The analysts anticipate a compound annual growth rate (CAGR) of 10.7% in USD revenue for TCS over the period from FY23 to FY25. Their target price of Rs 3,790 implies a valuation of 25 times the estimated FY25 earnings per share (EPS). The analysts maintain a “BUY” rating on TCS shares.
The analysts at Motilal Oswal believe that TCS is better positioned than its peers to gain wallet share and be at the forefront of clients’ cost take-out initiatives, which have become necessary in a constrained spending environment. TCS’s balanced portfolio between discretionary and run-the-business (RTB) services aligns with global IT spending trends. They have made some adjustments to their estimates, resulting in a 0-1% cut in EPS projections for FY2024-26. Their fair value (FV) for TCS has increased to Rs 3,400 on rollover, and they value TCS at an unchanged multiple of 22 times the estimated June 2025 earnings. The analysts maintain an “ADD” rating on TCS shares.
These assessments from Motilal Oswal and Kotak Institutional Equities highlight TCS’s strengths and growth potential in the IT sector. TCS’s expertise in cost-efficiency projects and its ability to cater to clients’ cost optimization needs position it favourably in the current market conditions. The company’s balanced portfolio and global IT spending alignment further strengthen its competitive position.
Investors should consider these perspectives, along with their own analysis and market conditions, before making investment decisions. It is important to note that analyst views may vary, and investors should conduct thorough research and evaluate multiple sources of information.Analysts at Nuvama Institutional Equities believe that the revenue deceleration expected in FY24, resulting from reduced discretionary spending, is already anticipated and reflected in the current market prices.
They anticipate a rebound in growth for the entire sector in FY25, driven by a sustained strong demand environment. They also expect Tata Consultancy Services (TCS) to be one of the primary beneficiaries of this demand due to its capabilities in securing transformational and cost optimization deals, as evidenced by its deal wins in Q1. As a result, the analysts retain their “BUY/SO” recommendation on TCS.
The analysts’ perspective suggests that while there may be a temporary slowdown in revenue growth in FY24 due to reduced discretionary spending, the market has already priced in this expectation. They anticipate a recovery in the following fiscal year, FY25, as the demand environment remains robust. They view TCS as well-positioned to capitalize on this demand due to its ability to secure transformative projects and help clients achieve cost savings.
Investors should consider this analysis in the context of their own investment strategy and risk appetite. While Nuvama Institutional Equities maintains a positive outlook on TCS and the sector as a whole, it is essential to conduct thorough research and analysis before making investment decisions. Factors such as market conditions, industry trends, and company-specific developments should be carefully evaluated to assess the investment potential of TCS and its alignment with individual investment goals.
