Reacting to disappointing Q4 financial numbers, TCS shares plunged 4.2 per cent on Friday, the most since October 17. However, analysts are still betting on Tata Consultancy Services and expect the company to see revenue growth in the ensuing quarters, due to promise in new platforms, execution capabilities, strong positioning and diversification.

Profitable engagements

The stock on Friday closed at ₹2,474.85 on the NSE, down 4 per cent over the previous day’s close. Of the 48.34 lakh shares traded on the NSE, 61.83 per cent (29.89 lakh shares) were presented for delivery, indicating genuine buying.

Amy McLaughlin, Research Analyst, Technology Business Research Inc, said, new platforms related to digital re-imagination hold promise, necessitating a large number of profitable engagements to materialise.

Barclays retains ‘Overweight’ on TCS and raised its 12-month price target to ₹2,975. Large client additions along with key deal wins came in healthy while gross employee additions for the company also remained strong in March 15, Barclays said. Sharekhan continues to remain ‘Positive’ on TCS, given its strong positioning, scale advantage and investments in the digital technology (it has crossed $125 million in FY15).

Short-term pressure

Spark Capital said: “With expectations subsiding, we expect the stock to be under pressure in the short term. We continue to maintain our positive stance given the diversification, inline with industry growth and impeccable execution.”

Prabhudas Lilladher has retained its ‘Buy’ call on TCS with a revised target price of ₹2,980: “We see continued moderation in street’s revenue expectation putting pressure in the near term. We expect TCS to grow in line with Nasscom’s guidance.”

Kotak Securities, which retain its ‘Add’ recommendation on TCS with a price target of ₹2,725, said: “We believe TCS has made all the right strategic bets, but will still see decline in growth rates (and reduction in growth premium over competition) as market share gains become more challenging and a portion of its portfolio drags overall growth.” Motilal Oswal analysts Ashish Chopra and Siddharth Vora, in a research report, said: “Our estimates are largely unchanged post the results. Lest weaker segments turn around in a couple of quarters, TCS’ outperformance to industry peers should continue to cool off in FY16.”

Buy on declines

Harit Shah of Karvy recommends ‘Accumulate’ on declines though he expects TCS to record lower revenue growth in FY16 than FY15.

According to Emkay Global Financial, while TCS has continued to miss the high expectations through recent quarters, its premium valuations in the sector should sustain given its strong positioning across key verticals/ regions/ clients.

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