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On Wednesday, JPMorgan analyst Ankur Rudra adjusted the outlook for HCL Technologies (NSE:HCLT:IN), elevating the stock from Neutral to Overweight. Accompanying this upgrade, the price target was also increased to INR1,750.00, up from the previous INR1,700.00. The revision follows HCL Technologies’ fourth-quarter results, which aligned with expectations and included a forward-looking guide that has remained unaffected by the current macroeconomic climate.
Rudra noted that unlike its peer Infosys (NSE:INFY), HCL Technologies has not experienced project rampdowns or cancellations. The company has consistently performed on par with or better than its rapidly growing peers for the past three years. The analyst highlighted the company’s impressive deal signings in the current market environment, which provide a rare visibility into its future, supporting an organic growth outlook of 1-4% in constant currency for the fiscal year 2026, which is anticipated to surpass that of its competitors.
The guidance offered by HCL Technologies has been considered conservative, especially at the lower and middle ranges, to account for any potential declines in demand. According to Rudra, the company’s portfolio, which is heavily weighted towards non-discretionary services, positions it well to withstand a weak or uncertain market.
The valuation of HCL Technologies’ stock appears attractive to JPMorgan, particularly given its 4% dividend yield and 6% free cash flow yield. These factors have led to the stock’s upgrade, as the firm regards HCL Technologies as a leader in scale growth for the fiscal year 2026, despite a marginal 2% reduction in earnings per share driven by margins. Rudra’s commentary underscores the firm’s confidence in HCL Technologies’ growth trajectory and its ability to navigate the current economic landscape.
In other recent news, JPMorgan has downgraded HCL Technologies from Overweight to Neutral, adjusting the price target from INR2,200.00 to INR1,700.00. The downgrade is attributed to soft signings and macroeconomic uncertainties that may delay client decision-making and affect the signing of new deals. As HCL Technologies approaches its fourth-quarter financial year 2025, the company is expected to experience a weaker performance due to the anniversary of a Verizon (NYSE:VZ) deal and the completion of a large transaction in Texas. Looking ahead, JPMorgan has expressed concerns about the first quarter of the financial year 2026, initially expected to show improvement, but now potentially at risk due to ongoing economic uncertainties. The firm predicts HCL Technologies might grow at a slower pace than competitor Infosys in the coming year. Additionally, JPMorgan has reevaluated HCL Technologies’ market valuation, noting that it trades at a premium with a one-year forward PE ratio of 23x compared to Infosys’ 22x, which they believe is unjustified given the lower growth forecast. Consequently, JPMorgan has revised its financial projections, cutting revenue estimates by 2-3% and margin forecasts by 20-30 basis points, leading to a reduction in earnings expectations by 2-4% for the financial years 2026-27E.
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