Exlservice shares target raised to $60 by Needham on strong Q4

On Thursday, Exlservice (NASDAQ:EXLS) received a price target increase from Needham, with analysts raising their expectations from $50.00 to $60.00 while reaffirming a Buy rating for the company’s stock. The $7.89 billion market cap company reported fourth-quarter results that exceeded market predictions on both revenue and earnings, bolstered by significant year-over-year growth in its digital operations and analytics segments. According to InvestingPro data, the company has demonstrated impressive momentum with a 60.6% return over the past year, though current analysis suggests the stock is trading above its Fair Value.

The company’s digital operations saw an 18% increase compared to the previous year, and its analytics business grew by 14%. This performance was complemented by the addition of 17 new client logos during the quarter, indicative of robust demand in the market. Despite a mixed outlook for FY25, including a forecasted $10 million foreign exchange headwind, analysts at Needham believe Exlservice’s underlying business momentum remains strong. InvestingPro data reveals the company maintains a strong financial position with a current ratio of 2.74 and operates with moderate debt levels, supporting its growth trajectory.

The firm’s positive outlook is also supported by Exlservice’s effective execution and the continuous rollout and adoption of AI-focused solutions. Needham’s analysts have noted that even though Exlservice’s shares trade at a premium—with a current P/E ratio of 42.88 and high EBITDA valuation multiples according to InvestingPro—the risk-reward balance is still seen as favorable. For deeper insights into Exlservice’s valuation metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Exlservice’s financial health was further highlighted by its ability to maintain healthy profit margins while expanding its customer base. The company’s success in securing eight new digital operations clients and nine in analytics during the fourth quarter underscores its competitive position in these growing markets.

The upgrade in the price target reflects confidence in Exlservice’s potential for upside surprises as the fiscal year 2025 progresses. Needham’s analysts underscored their stance by reiterating their Buy rating and emphasizing the company’s strong execution and strategic focus on AI-driven offerings.

In other recent news, ExlService Holdings Inc. reported its fourth-quarter 2024 earnings, highlighting a strong financial performance. The company achieved an adjusted earnings per share (EPS) of $0.44, surpassing the forecast of $0.42, and reported revenue of $481.4 million, exceeding expectations of $475.91 million. This represents a year-over-year revenue growth of 16.3%, driven by the increasing demand for AI and data modernization services, which now account for over half of the company’s revenue. For the full year 2024, ExlService’s revenue reached $1.838 billion, marking a 12.7% increase from the previous year, while the adjusted EPS rose by 15.4% to $1.65.

Looking ahead, ExlService projects its 2025 revenue to be between $2.025 billion and $2.060 billion, representing a 10-12% growth, with an anticipated adjusted EPS of $1.83 to $1.89. The company plans to continue investing in AI and data solutions, focusing on cross-selling and integrated deal strategies. Stifel analysts recently maintained a Buy rating on ExlService shares, with a price target of $48, following the company’s earnings report. They noted that both revenue and EPS estimates for 2025 align with the upper end of ExlService’s guidance range, projecting 11-13% growth for revenue and 11-14% growth for EPS.

Furthermore, ExlService demonstrated a sequential headcount increase of 3.6%, which aligns with its revenue guidance. The company’s strategic focus on AI and data services is expected to drive further growth, as highlighted by CEO Rohit Kapoor, who emphasized the importance of data and AI as core elements of their business strategy. Kapoor also mentioned that ExlService’s competitive edge lies in its fusion of domain, data, and AI expertise, which positions the company well to capitalize on the growing demand for these services.

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