On Monday, Citi revised its price target for Thoughtworks Holding shares (NASDAQ:TWKS), a global technology consultancy, reducing it to $2.75 from the previous $5.00, while retaining a Neutral rating on the stock. The adjustment follows Thoughtworks' fourth-quarter results for fiscal year 2023, which were released on February 27 and fell short of expectations.
Citi attributes the underwhelming performance to a challenging macroeconomic environment and the company's premium market positioning, which have both continued to exert pressure on the business.
Thoughtworks has been actively working to mitigate these challenges by implementing cost-cutting measures and expanding its lower-cost delivery options. However, these significant structural changes had a negative impact on the company's delivery capabilities in the fourth quarter of 2023.
Citi believes that the issues related to delivery can be resolved more quickly than the time it will take for the effects of lower pricing to become apparent, particularly as the market for digital applications management and outsourcing remains underpenetrated.
The firm also expressed skepticism regarding any strong recovery in the second half of the year for the sector as a whole. Despite the lowered expectations, Citi noted that potential takeover interest in Thoughtworks could offer some support for the stock at these reduced price levels. The Neutral rating indicates that Citi maintains a cautious stance on the company's shares, awaiting further developments that could influence the stock's performance.
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