On Tuesday, Goldman Sachs (NYSE:GS) adjusted its price target for HCL Technologies (NS:HCLT:IN) shares, reducing it to INR1,770 from INR1,800 while maintaining a Neutral stock rating. The adjustment follows HCL Technologies' quarterly financial results, which showed a revenue increase of 3.8% quarter over quarter. However, when mergers and acquisitions are excluded, the growth estimate stands at 3.4% quarter over quarter, approximately 90 basis points below Goldman Sachs estimates (GSe).
The services segment of HCL Technologies exhibited a 1.7% quarter over quarter revenue growth on an organic basis. This performance was nearly in line with Goldman Sachs' projection of 1.8% growth for the quarter and represented a slowdown from the 2.6% growth experienced in the second quarter, excluding the impact of divestitures. The company's EBIT (Earnings Before Interest and Taxes) margins saw an expansion of 90 basis points quarter over quarter, translating to a 4% year-over-year EBIT growth, which aligned with Visible Alpha consensus but fell 2% short of Goldman Sachs' expectations.
In response to these outcomes, Goldman Sachs has revised its EPS (Earnings Per Share) estimates for HCL Technologies downward by 1-2%. Despite the price target reduction, the firm's outlook on HCL Technologies remains neutral. Goldman Sachs anticipates a robust growth trajectory for the company, forecasting a 7% revenue increase on a constant currency basis for the fiscal year 2026, alongside a 14% year-over-year EBIT growth. This growth expectation is seen as already factored into the company's current market valuations.
In other recent news, HCL Technologies has been in the spotlight following multiple updates from JPMorgan (NYSE:JPM). The financial giant adjusted HCL's target price to INR2,200 while maintaining an Overweight rating on the stock. This adjustment came after HCL Technologies reported a slight revenue shortfall and a narrowed organic Services growth. However, the company's margins stayed in line with predictions, and it recorded a 1.7% quarter-over-quarter growth in constant currency, expected to be the highest among its competitors.
JPMorgan also upgraded HCL Technologies from Neutral to Overweight, increasing the price target to INR 2,250.00. This upgrade was influenced by the integration of the CTG acquisition, anticipated to enhance HCL Technologies' constant currency revenue growth by 3% over the fiscal years 2026-2027. JPMorgan projects HCL Technologies to emerge as the fastest-growing large-cap company during this period, with a valuation multiple similar to industry peers such as Infosys (NS:INFY) and Tata Consultancy Services (NS:TCS).
The optimism surrounding HCL Technologies is attributed to its portfolio composition, seen as less dependent on discretionary spending outside the Banking, Financial Services, and Insurance sector. In the current economic environment, where such expenditures have not fully recovered, HCL Technologies is expected to maintain its growth momentum. These recent developments reflect a positive outlook for HCL Technologies, well-positioned to capitalize on its portfolio.
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