WNS - Citi downgrades ExlService to sell over premium valuation

In a research note published on U.S. IT services firm, Citi Research downgraded ExlService ( NASDAQ: EXLS ) from neutral to sell citing its premium valuation.

The bank also cut the firm's price target from $150 to $134 and lowered its revenue estimates due to FX and some incremental downturn conservatism layered in FY23.

Analysts wrote, "EXLS has done well post-pandemic given a solid environment for analytics and effective expectations management, especially on the margin front…we look for this benefit to peter out in the coming quarters and given EXLS' expensive forward P/E of ~23x FY23 EPS, it should be a good candidate for underperformance."

In the near term, Citi expects a slight top and bottom-line beat relative to consensus from EXLS with growth led by continued analytics strength. "We expect the company to slightly increase its 2022 outlook ranges as there is less of an FX headwind for EXLS than some of its comps and we believe that current management has shown a track record of providing slightly conservative outlooks that it can overachieve on and raise each quarter. So we actually believe our call works out over a multi-quarter period," analysts add.

Citi's rating is in contrast with SA Quant rating of hold , Wall St. analysts' rating of buy. The bank also cut targets on Genpact ( G ) and WNS Holding ( WNS ), but continue to rate them as buy.

ExlService shares have dropped 2% pre-market, but has climbed 35.35% over the past year.

Take a look at how the data analytics company performed in Q1

For further details see: