After its September quarter numbers, the Tata Consultancy Services (TCS) share price tanked over 6 percent in early trade on Monday, October 11.
The IT tycoon was the worst-performing stock on S&P BSE Sensex, while the standard index was nearing all-time highs.
The IT major had reported a consolidated net profit of Rs 9,624 crore for the second quarter of 2021-22, registering a 14.1 percent on-year growth.
Its consolidated revenue during the July-September period stood at Rs 46,867 crore, up 16.8 percent more than a year-ago quarter.
The revenue growth in currency came in at 15.5 percent YoY.
On a sequential basis, profit grew 6.8 percent, and the revenue increased by 3.2 percent in Q2FY22. So far this year, the TCS share price is up to 27%.
This massive drop in the stock price has removed nearly Rs. 1 lakh crore in market capitalization for TCS.
TCS Share: Time to buy, sell or hold it after Q2 earnings?
Post the significant fall of TCs on Monday; investors are in dilemma whether to buy, sell or hold on to TCS share.
Here’s the take of the foreign brokerages about the stock and the company after its September quarter earnings:
Jefferies
The research house-sustained hold rating with a target at Rs 3,950 per share as a shortfall of positive surprises in the Q2 results offers to rescope for re-rating.
The Q2 revenue, which was up 4 percent in the CC term, somewhat missed the estimates, though, with a ten-bps jump in margin and 7 percent growth in profit over the previous quarter, the stock was forth of estimates.
Total contract value (TCV) at $7.6 billion was relatively healthy, and the company is confident of a strong growth outlook.
With the case of software as a service (SaaS) business, TCV provides transparency in the volume of business one can expect from a customer after a deal is signed.
TCS has controlled its margins well, despite supply pressures.
Kotak Institutional Equities
Kotak Institutional Equities has continued to add rating on the stock with a target at Rs 4,100 per share post the company’s revenue missed estimates due to a moderation in growth in continental Europe.
The broking house has cut FY22-24 EPS estimates by 3-4percent and target by 3 percent, and it maintains that the company is better positioned than its peers to face the margin headwinds.
Macquarie
Macquarie has retained call with a target of Rs 4,530 per share after marginally missed estimates due to a lower margin on supply-side issues.
It is well situated to catch the demand strength. The research house has lowered its FY22 estimate for earnings per share (EPS) by 3 percent.
Goldman Sachs
The research house was managed the buy rating with a target at Rs 4,657 per share as earnings were below estimates on revenue, margin, and order book front.
It has cut the EPS estimates by 1-2 percent over FY22-26 and sees a robust deal pipeline given underlying solid demand momentum.
UBS
The research house kept a neutral rating on the stock with a target price of Rs 4,180 per share.
It expects the stock to merged here with a slight downward bias, and if the second half slows further, there may be a risk to FY23 consent revenue forecasts.
CLSA
The brokerage has managed to outperform the rating with a target of Rs 4,050 per share after Q2 was a little below estimates on revenue growth and margins.
CLSA has cut the FY22-23 EPS estimates by 1 percent on the modest order book and weak near-term margin outlook. It expects that incremental upside could be limited from current levels.
