TCS shares defy market sell-off as target prices rise after Q4 beat. Should you buy?

The company also reported its best quarterly deal TCV of $13.2 billion (up 63% QoQ/32%YoY, book-to-bill ratio at 1.8x), including one mega-deal. The company maintained its strong operating margin performance, with EBIT margin up 100bp QoQ to 26.0%, the lower end of its medium-term guidance band for the first time in the last 12 quarters.

Global brokerage JPMorgan upgraded the stock to overweight rating and upgraded the target price of Rs 4,500, saying that the earnings surprised positively on margins. With deal signings at highest ever and TTM book to bill at 1.5x, TCS is likely to outpace peers in FY25, it said.

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Goldman Sachs, which has a target price of Rs 4,350 on TCS with a buy rating, said it sees an increasing probability of double-digit earnings growth in FY25. Jefferies has given a target price of Rs 4,030 while Morgan Stanley is overweight on TCS with a target price of Rs 4,350.

Domestic brokerage Kotak Equities, which raised the target price from Rs 4,140 to Rs 4,300, has raised margin assumptions on impressive execution and cost management.

"We expect TCS to lead peers on revenue growth in FY2025E, aided by contribution from BSNL and as other mega deals ramp up. Clients remain focused on cost take-out initiatives, an area of strength for TCS, enabling it to gain wallet share against weaker peers, leveraging its broad range of service offerings and diversified presence across verticals and geographies," Kotak said.

Analysts at Motilal Oswal have broadly maintained FY25-FY26 EPS estimates and stuck to its target price of Rs 4,600.

However, CLSA has an underweight call on TCS with a target price of Rs 3,941 and Nomura has a reduce rating, with a target price of Rs 3,250.

Delayed macro revival and lack of management confidence could be a major factor in the near-term recovery of the stock price, CLSA said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)