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On Wednesday, JPMorgan downgraded HCL Technologies (NSE:HCLT) stock from Overweight to Neutral and reduced the price target from INR2,200.00 to INR1,700.00. The firm pointed to several factors contributing to a less optimistic outlook for the company. Soft signings and macroeconomic uncertainty were highlighted as immediate concerns that may lead to delays in client decision-making and consequently, affect the signing of new deals.
The downgrade comes as HCL Technologies approaches its fourth-quarter financial year 2025 (4QFY25), which is expected to be impacted by the anniversary of a Verizon (NYSE:VZ) deal and the completion of a large transaction in Texas. These events are anticipated to contribute to a weaker performance for the quarter.
JPMorgan also expressed concerns about the first quarter of the financial year 2026 (1QFY26), which was initially expected to show better results. However, the prevailing economic uncertainty may put these expectations at risk, leading to a potentially weak start for HCL Technologies in FY26. The firm predicts that this slow start could result in HCL Technologies growing at a slower pace than its competitor Infosys (NSE:INFY) in the coming year.
The downgrade also reflects a reevaluation of HCL Technologies’ market valuation. JPMorgan noted that HCL Technologies is currently trading at a premium compared to Infosys, with a one-year forward price-to-earnings (PE) ratio of 23x versus 22x for Infosys. Given the lower growth forecast, JPMorgan believes that this premium is not justified.
In response to these factors, JPMorgan has adjusted its financial projections for HCL Technologies. The firm has cut its revenue estimates by 2-3% and margin forecasts by 20-30 basis points. This revision has led to a reduction in earnings expectations by 2-4% for the financial years 2026-27E.
In other recent news, HCL Technologies announced its third-quarter financial results for fiscal year 2025, meeting analyst expectations. The company updated its constant currency revenue growth forecast for the fiscal year 2025 to a range of 4.5%-5%, which includes the impact of acquiring assets from Hewlett Packard Enterprise (NYSE:HPE)’s Communications Technology Group. CLSA analyst Sumeet Jain adjusted the price target for HCL Technologies to INR1,882 while maintaining a Hold rating, citing muted organic growth guidance. Goldman Sachs also revised its price target to INR1,770, maintaining a Neutral rating, and noted a softer revenue growth with a 1-2% reduction in EPS estimates.
JPMorgan’s Ankur Rudra adjusted the price target to INR2,200 from INR2,250, maintaining an Overweight rating, and highlighted HCL’s dividend strength and potential as one of the fastest-growing large-scale providers. Despite a 6% decrease in new signings, the Actual Contract Value increased by 9% quarter-over-quarter and 23% year-over-year. Rudra expressed confidence in HCL Technologies, suggesting that the current stock price weakness presents a buying opportunity. Additionally, JPMorgan upgraded the stock from Neutral to Overweight, increasing the price target to INR2,250, reflecting the CTG acquisition’s expected boost to revenue growth.
The firm’s analysis indicates that HCL Technologies is positioned to outperform its peers in growth, especially with its portfolio less dependent on discretionary spending outside the BFSI sector. These developments highlight the company’s strategic moves and potential for robust growth in the coming years.
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