Synopsis:
TCS is in focus as JP Morgan expects a 24% upside in this stock, citing strong hold on its existing segment, and value unlocking from its recent acquisition.
The shares of this leading IT stock are in focus after certain upticks announced by the brokerage on its latest research report. In this article, we will try to understand the rationale behind this upside.
With a market capitalization of Rs 11,38,630 crore, the shares of Tata Consultancy Services Ltd are currently trading at Rs 3,147 per share, representing a decline of 31 percent from its 52-week high of Rs 4,585.90 per share. Over the past five years, the stock has delivered a return of 41 percent.
Analyst Comments
Leading global brokerage house JPMorgan has upgraded TCS to “overweight” from “neutral” and has raised its price target to Rs 3,800 per share from Rs 3,650 per share, signalling an upside potential of 24.4 percent from its previous day’s closing price of Rs 3,054 per share.
JPMorgan pointed out that TCS has had a rough start this year, trailing behind the Nifty by 29 percent and the Nifty IT by 6 percent. This is mainly due to growth that didn’t meet expectations and some pressure on margins. Still, the brokerage is confident that TCS’s business model is solid and anticipates a recovery in growth starting in the second half of FY26.
The brokerage had moderated international constant currency and year-on-year growth to 0 percent and 5 percent respectively, in FY26 and FY27, but they do expect an EPS upgrade of 2-3 percent over the next three years, tied to margin improvements of 55 basis points in FY26 and 57 basis points in FY27.
JPMorgan also highlighted that TCS shares are currently trading at 19.7 times their two-year forward P/E, which is significantly lower than the five-year average, making them look quite appealing. On top of that, the company boasts a 4.5 percent forward free cash flow yield and a 3.8 percent dividend yield.
While TCS is dealing with some short-term hurdles due to deal delays and cautious customers, management is still optimistic about medium- to long-term growth, supported by a robust order book and strong relationships with clients.
Financial Highlights
The company’s revenue for Q1 FY26 was Rs 63,437 crore, representing a 1.32 percent increase from Rs 62,613 crore in the same quarter last year. However, on a sequential basis, revenue declined by 1.62 percent from Rs 64,479 crore in Q4 FY25.
Regarding its profitability, the company reported a 6 percent net profit growth to Rs 12,819 crore in Q1 FY26, compared to Rs 12,105 crore in Q1 FY25. Additionally, on a QoQ basis, it grew by 4.3 percent from Rs 12.293 crore.
The stock delivered an ROE and ROCE of 52.38 percent and 64.63 percent respectively, and is currently trading at a P/E of 23.17x as compared to its industry average of 30.20x.
This JP Morgan’s bullishness on TCS would be seen in the upcoming days if it is able to stand upon the brokerage’s performance or not. However, an investor must do their own research before investing.
Written by Satyajeet Mukherjee
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