TCS shares gain nearly 3% after Q1FY25 earnings; Jefferies double upgrades stock to buy

TCS share price, TCS Q1FY25: TCS shares in Friday’s trade (July 12) gained nearly 3 per cent at day's high to Rs 4033.45 after the Mumbai-headquartered IT major’s Q1FY25 revenue and margin came in better than the Street estimates. Revenue at the company surged 2.2 per cent over the previous three months to Rs 62,613 crore for the first quarter of the current financial year.

The software exporter’s consolidated net profit during the reporting quarter declined 3.2 per cent sequentially to Rs 12,040 crore but was in line with estimates.

The IT major said that all its major markets returned to sequential growth, contributing to a strong start to the new financial year. 

The company’s June-quarter earnings before interest and taxes (EBIT) declined 3.0 per cent sequentially to Rs 15,442 crore while margin - a key measure of profitability - contracted by 130 basis points (bps) to 24.7 per cent as against 26 per cent in the previous quarter.

Zee Business analysts pegged Tata Consultancy Services' first-quarter EBIT at Rs 15,280 crore and margin at 24.5 per cent.

What brokerages recommend on TCS stock after its Q1FY25 earnings?

Global brokerage Jefferies has double-upgraded the stock to buy from hold with the target raised to Rs 4,615 from Rs 4,030. The suggested target price implies potential gains of nearly 18 per cent. The brokerage held that the software exporter’s earnings came in better than estimates. Further, it sees the return to growth of its key verticals and markets. Hiring during April-June period at a seven-quarter high are signs of revival at the company. 

TCS offers value relative to Nifty as its current PE premium is below its 5-yr average, added Jefferies.

JP Morgan, on the other hand, maintains an 'overweight' rating with the target raised to Rs 4,600. The brokerage said rising momentum considering sluggish demand is a cause for minor joy. While the brokerage maintains status-quo on the demand environment, it sees margin levers in place to aid expansion.