In the early trading session on Tuesday, Tata Consultancy Services (TCS) witnessed a nearly 2 percent surge in its stock price following a favorable rating upgrade by the renowned global brokerage firm UBS.
UBS has revised its rating for the TCS stock, elevating it from ‘neutral’ to ‘buy’, and concurrently increased the target price to Rs 4,700 from the earlier Rs 4,000 per share, indicating a projected 17 percent upside potential.
As of approximately 10:50 am, TCS shares had surged by 1.87 percent, reaching Rs 4,075.05.
The analysts at UBS foresee a promising trajectory for TCS, attributing it to an anticipated surge in large deal volumes, which they believe will contribute significantly to the company's sustained long-term growth, positioning it favorably as India’s largest IT firm.
Furthermore, UBS anticipates TCS to maintain a competitive edge over its industry peers, projecting a revenue growth outperformance by 100-150 basis points. They assert that TCS is likely to outperform its counterparts in terms of margin enhancement by fiscal year 2025, a factor they believe is currently underestimated by the market.
Highlighting numerous growth catalysts, UBS underscores the significance of TCS's contracts expansion, particularly with entities like BSNL, NEST, and Aviva. Additionally, a resurgence in the BFSI sector and the effective execution of cloud migration projects are anticipated to propel TCS's future growth trajectory.
In terms of valuation, analysts note that TCS is presently situated at the lower end of its long-term trading premium spectrum relative to its industry competitors.
In a parallel development, Elara Securities has reiterated its "buy" stance on TCS, setting a target price of Rs 4,430. The brokerage firm has slightly adjusted its earnings per share (EPS) estimates for fiscal year 2025 by 3-4 percent and advanced them by a quarter.
Elara Securities maintains an optimistic outlook, citing TCS's exceptional earnings resilience among its peers. They underscore TCS's robust margins, formidable delivery capabilities, strategic alliances with hyperscalers, and substantial contract wins as key factors supporting their bullish perspective.
