Stifel maintains Buy on Exlservice stock with $48 target

On Wednesday, Stifel analysts upheld a Buy rating for Exlservice (NASDAQ:EXLS) shares, maintaining a $48.00 price target. Currently trading at $51.19, near its 52-week high of $52.43, the stock has delivered an impressive 60% return over the past year. The decision followed Exlservice’s fourth quarter earnings, which revealed a revenue surpassing estimates by approximately 1% and a year-over-year organic constant currency growth of 15%. Earnings per share (EPS) exceeded expectations by 7%, marking a 27% increase compared to the previous year, largely due to the revenue outperformance. According to InvestingPro analysis, the stock appears overvalued at current levels.

The 2025 consensus for Exlservice’s revenue and EPS aligns with the upper end of the company’s guidance range, projecting an 11-13% year-over-year constant currency growth for revenue and an 11-14% growth for EPS. This outlook builds on the company’s strong track record, with InvestingPro data showing a 13% revenue CAGR over the past five years and healthy financials, including a robust current ratio of 3.02. Stifel noted that management’s initial guidance is typically conservative, and thus, it is not surprising that the consensus and their own estimate are at or above the high end of the 2025 guidance.

Additionally, Exlservice demonstrated a solid sequential headcount increase of 3.6% quarter-over-quarter, which is in line with the revenue guidance provided. However, due to incomplete information from the release, such as non-GAAP adjustments and tax rates, Stifel analysts found it challenging to estimate the implied EBIT margin. Their best guess prior to the earnings call was a roughly flat margin, give or take.

The analysts also observed that, normalized for comparative purposes, growth was similar to recent trends, posting a 13-14% increase using a two-year stack. Despite this, there was some movement among the various industry verticals Exlservice serves. Notably, healthcare growth accelerated as reported, but when analyzed using the two-year stack method, it actually decelerated.

In other recent news, ExlService Holdings Inc. (EXLS) reported its fourth-quarter 2024 earnings, surpassing expectations with an adjusted earnings per share (EPS) of $0.44 compared to the forecast of $0.42. The company also exceeded revenue projections, reporting $481.4 million against the expected $475.91 million. This marks a 16.3% increase in revenue year-over-year, with data and AI services contributing significantly to this growth. For the full year 2024, EXLS achieved revenue of $1.838 billion, reflecting a 12.7% increase from the previous year, and an adjusted EPS of $1.65, up 15.4%.

In another development, EXLS has set its 2025 revenue expectations between $2.025 billion and $2.060 billion, indicating a growth forecast of 10-12%. The company also anticipates an adjusted EPS range of $1.83 to $1.89, representing an 11-14% increase. Analysts from firms like TD Cohen and Jefferies LLC participated in the earnings call, where EXLS discussed its strategic focus on AI and data solutions. The company has recently launched new AI initiatives and plans to integrate these capabilities further into its operations.

Additionally, EXLS announced changes to its operating model to better align with industry market units and enhance client engagement. This shift is expected to support cross-selling and integrated deal strategies. The company has also expanded its partnerships with tech giants such as NVIDIA (NASDAQ:NVDA) and AWS to bolster its AI capabilities. These recent developments underscore EXLS’s commitment to leveraging AI and data modernization to drive growth and enhance its competitive position.

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