Most Analysts Stay Bullish On TCS But See Limited Room For Upside
An employee walks past a signage for Tata Consultancy Services Ltd. (TCS) at the company’s Synergy Park campus in Hyderabad, India. (Photographer: Namas Bhojani/Bloomberg)

Most Analysts Stay Bullish On TCS But See Limited Room For Upside

Most analysts raised their price targets for Tata Consultancy Services Ltd., expecting the nation’s largest software services exporter to continue benefitting from businesses moving online and deal wins to offer improved growth outlook.

The IT company reported a 4% sequential rise in revenue at Rs 43,705 crore in the quarter ended March. Its revenue in dollar terms increased 5% to $5,989 million. TCS reported new deals worth $9.2 billion during the reported quarter, helping it to maintain double-digit revenue growth guidance for FY22.

Net profit for the quarter rose 6.3% over the preceding quarter, while EBIT margins expanded 20 basis points to 26.8%.

While that prompted analysts to maintain their bullish investment recommendations on the stock, some said its premium valuations mostly capture the potential positives.

“We don’t see any meaningful upgrades for our estimates, even as Q4 performance, continued positive stance on transformation and strong TTM TCV of $31.5 billion provide us comfort for the near term,” Rahul Jain of Dolat Capital said in a note.

Shares of TCS fell as much as 2.72% to Rs 3,158 in the early minutes of trade. The stock is down for the second straight day. Of the 46 analysts tracking TCS, 27 have a ‘buy’ rating on the stock, 12 suggest a ‘hold’ and seven recommend a ‘sell’, according to Bloomberg data. Based on the 12-month Bloomberg consensus data, the stock has a return potential of 4.2%.

Also read: TCS Q4 Results: Revenue Rises For Third Straight Quarter, Margin Improves

Here’s what analysts have to say about TCS’ fourth-quarter results...


  • Maintains ‘outperform’ rating; hikes price target to Rs 3,560 apiece from Rs 3,370.
  • Efficient cost management, healthy order book and an optimistic outlook.
  • Margin resilience in Q4 surprises again.
  • Raises FY22/23 EPS estimates by 3% and 2%.
  • Stock valuations are rich and should limit absolute upside.
  • Healthy cash generation, liberal capital return policy and macro demand strength should sustain relative outperformance versus the broader market.


  • Maintains ‘buy’ rating; hikes price target to Rs 3,740 apiece from Rs 3,720.
  • TCV of $9.2 billion indicates improved growth visibility.
  • Management comments on growth outlook were encouraging.
  • Raises earnings estimates by 1-2% over FY22-23.
  • Expects 10% revenue CAGR and 15% EPS CAGR over FY21-23.
  • Scope for further rerating with spread between bond yield and its earnings yield being near average levels.

Axis Capital

  • Maintains ‘add’ rating; hikes price target to Rs 3,500 apiece from Rs 3,400.
  • Deal wins to drive double-digit growth trajectory.
  • Robust deal wins and quicker conversion enhance revenue visibility.
  • Large cost takeout and vendor consolidation deals are expected to sustain in the medium term.
  • Expects 12.5% U.S. dollar revenue CAGR and about 17% EPS CAGR over FY21-23E.


  • Maintains ‘outperform’ rating and hikes price target to Rs 3,640 apiece from Rs 3,620.
  • Remains well positioned to benefit from three key spending themes — cloud transformation, customer experience and core modernisation.
  • Using internal fulfilment and hiring ahead of time to mitigate any talent supply pressure in FY22.
  • Growth pick-up to aid stability in margins aspirational band of 26-28%.
  • Pick-up in large deal wins, margin stability are key catalysts.
  • Slower growth and margin headwinds from volatile currency are key risks.

BofA Securities

  • Maintains a ‘neutral’ rating and hikes price target to Rs 3,310 apiece from Rs 3,225.
  • A strong quarter of deal bookings, commentary of deal pipeline and absence of significant supply-side pressure implies visibility of FY22 earnings growth remains high.
  • Increasing participation and market share in high-value transformational IT programmes bode well for the medium-term growth outlook.
  • Continues to expect TCS to be a beneficiary of market share shift from internal IT centres and return of large deals to the market in CY21.


  • Maintains overweight rating and raises price target to Rs 3,640 apiece from Rs 3,450.
  • Q4 was a class act in balancing unexpected growth with profitability despite supply mismatches.
  • Secular growth across geographies and vendors, strong signings momentum underwrite mid-teens growth in FY22.
  • Raises FY22-23E revenue estimates by 1-2% and EPS by 3-4%.


  • Maintains ‘outperform’ rating and price target of Rs 4,176 apiece.
  • Revenue growth and margins were slightly below estimates.
  • Core transformation, cloud migration, data and application modernisation to be key drivers going ahead.
  • Well positioned for multi-year technology upcycle going ahead.
  • Strong order book, robust pipeline to aid strong revenue visibility.


  • Maintains ‘hold’ rating and price target of Rs 3,150 apiece.
  • Broad-based revenue growth performance, highest ever deal intake key positives.
  • Largely retains EPS estimates for FY22/23.
  • Well poised to benefit from strong demand, acceleration in cloud adoptions and digital transformation opportunities.
  • Current valuations largely captures the above factors.

Motilal Oswal

  • Maintains ‘neutral’ rating and price target of Rs 3,250 apiece.
  • Strong FY21 exit rate and deal wins to drive growth in FY22.
  • Expects TCS to be better positioned to leverage acceleration in large deals.
  • Expects about 16% U.S. dollar growth CAGR over FY21-23.
  • Keeps EPS estimates unchanged and remains neutral given elevated valuations.
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