Tata Consultancy Services (TCS) may have posted disappointing Q2 results, but that hasn't stopped analysts from issuing bullish calls on the IT giant's stock. Even with a slow demand recovery and margin contraction in the second quarter, brokerages see significant potential for share market investment in TCS as they forecast a recovery in tech and the BFSI (banking, financial services, and insurance) sectors. Here's why TCS remains a hot pick for investors despite its recent challenges.
Impact of Q2 results on TCS stock
TCS's share price slipped by 0.7% on the NSE, trading at Rs 4,199 following the earnings miss. According to analysts, TCS saw a decline in revenue growth and a rare margin contraction, which was partly driven by client-specific challenges and slower-than-expected demand recovery, particularly in North America. HSBC termed this as a "painfully slow demand recovery," with the brokerage identifying these factors as the primary reasons behind TCS's weak second-quarter performance.
Despite these short-term concerns, analysts see potential in TCS as a long-term share market investment. Brokerage houses like JPMorgan and Jefferies expect improvements in the second half of FY25, citing a recovery in financial services and technology demand, alongside margin improvements from the unwinding of the BSNL deal.
Bullish outlook for TCS: What analysts say
Brokerages have maintained bullish calls on TCS stock, with target prices indicating up to 28% upside potential. For example, JPMorgan has retained its 'Overweight' call, with a price target of Rs 5,100, expecting financial and tech growth recovery to drive revenues. Meanwhile, HSBC has upheld a 'Buy' rating, setting a target of Rs 4,540, and identified TCS as the best-managed company in the sector.
Motilal Oswal, too, is optimistic, offering a target of Rs 5,400 and highlighting the positive momentum from large deals such as the BSNL ramp-up, which should help sustain growth. Analysts also point to TCS as a strong share market investment for those looking to capitalise on potential margin recovery.
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