TCS shares: Should you buy/hold as Q3 profit misses but revenue beats estimates?

TCS shares: Should you buy/hold as Q3 profit misses but revenue beats estimates?

Market


IT giant reported a lower-than-expected profit for the third quarter ended December 2022 (Q3 FY23), however, the revenue figures were ahead of estimates. The management flagged the challenges in Europe as clients tightened spending due to rough economic conditions, while its workforce shrank for the first time since the pandemic.

What brokerages recommend on TCS shares post Q3 results

Jefferies

“TCS’s 3QFY23 revenues beat estimates but profits up 11% YoY missed due to forex losses. While TCS has delivered healthy growth in 3Q, falling headcount and bookto-bill ratio points to sharp growth moderation in FY24. We tweak our estimates slightly and expect TCS to deliver 11% EPS Cagr over FY23-25. While TCS is better placed in a recessionary environment, its rich valuations will likely weigh on stock performance. TCS’ premium valuations may limit upside. Maintain Hold with target price of 3,500.”

Antique Stock Broking

“Although TCS remain one of the best managed companies among Indian IT services with its ability to engage with large clients for their large transformation programs, we downgrade the IT stock to HOLD from BUY on lack of an upside. We also cut our target price to 3,600 (from 3,700) as we marginally lower our CC growth forecast and margin assumptions while macroeconomic uncertainties in the US could be a downside risk.”

DAM Capital

“TCS is rightly positioned to leverage the expected growth in the industry, given its size, capabilities, and portfolio stretch. So far, it has not only sustained market leadership, but also delivered superior execution, generating consistently high margins (relatively) and industry-leading return ratios. We maintain our multiples of 24X FY25 EPS. Our target price is 3,580. While we remain positive on the company, however maintain Neutral rating, given its rich multiples.”

Dolat

“Soft TCV, flat net headcount addition, weak demand in Europe suggest unfavourable risk-reward as we believe valuations captures the stability but not the risk of further weakening macros, and thus maintain our Reduce rating with TP of 3,420.”

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.


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