CTSH - DXC Technology slumps 25% after Q1 results bring rating cuts at Wall Street
2023-08-03 08:38:33 ET
RBC Capital Markets downgraded DXC Technology ( NYSE: DXC ) to Sector Perform, while BMO Capital Markets moved to a Market Perform rating after Q1 results missed estimates and the company reduced its fiscal full year 2024 outlook.
RBC analysts said on Wednesday that given the pressure on demand, especially in the GIS segment, the disappointing results, and outlook reduction, they expect the shares to be weak on Thursday and then relatively rangebound for the foreseeable future.
Thus the firm downgraded the stock to Sector Perform — which is similar to Hold — from Outperform, which is similar to a Buy rating; reduce its estimates and lower its price target on DXC to $29 from $34.
DXC Technology Q1 non-GAAP EPS and revenue declined Y/Y and also fell short of analysts' expectations. The company also cut its full year outlook.
DXC expects fiscal '24 revenue to be between $13.88B and $14.03B, compared to $14.4B and $14.55B provided during Q4 results in May ( Consensus $13.88B). The company lowered its forecast for full year non-GAAP EPS to be in the range of $3.15 to $3.40, verus prior estimate of $3.80 to $4.05 (Consensus $3.14).
BMO Capital Markets' analysts said they think that a tough macro is a challenging time to continue a turnaround, and they do not see relief in the medium-term. Particularly, while GBS is performing reasonably well, GIS continues to flounder.
The analysts added that they believe that both Accenture ( ACN ) and Cognizant ( CTSH ) offer better risk/reward at this juncture than DXC, for those looking for services exposure.
The firm reduced its target price on DXC to $25 from $27, and moved to a Market Perform rating, which is similar to a Hold rating.
DXC -24.60% to $20.41 premarket Aug. 3
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DXC Technology slumps 25% after Q1 results bring rating cuts at Wall Street