TCS stock down nearly 2% following Q2 results; Should you buy, sell the stock?

financialexpress.com:

Tata Consultancy Services (TCS) share price tumbled 1.78% to Rs 3,545.40 today, a day after the IT major reported 8.7% growth to Rs 11,342 crore in its consolidated net profit in the second quarter of FY24. TCS had reported a profit of Rs 10,431 crore in the same period a year ago. The IT major’s net profit jumped 2.4% on-Quarter. The company also announced a share buyback for Rs 17,000 crore at a price of Rs 4,150 a share on October 11, 2023. TCS stock price has slipped 0.71% in the last one month and has surged over 14% in the past one year.

“TCS’s 2Q results do not inspire confidence on demand recovery in the near  term, though large deal wins are likely to lead to better growth in 2H. We tweak our EPS estimates to reflect the 2Q results, FX and the Rs 17,000 crore buyback and expect 10% EPS Cagr over FY24-26. TCS’s current PE multiple of 27x seems rich amid an uncertain demand environment. Maintain Hold with rolled over PT of Rs 3,690 based on 25x PE.”

“TCS’ YoY growth trajectory will pick up from Q1FY25E, taking FY24E growth of 4% CC to >7.5% CC in FY25E, supporting EPS growth of 9% and 12%. The decline in net headcount and sub-contracting reduction are indicative of near-term softness and we marginally tweak estimates to factor in the near-term growth softness. Our target price of Rs 3,800 is based on 26x Sep-25E EPS (5Y/10Y average at 26x,23x).”

“From a long-term perspective, we believe TCS has built a resilient business model by securing multiple long-term contracts with the world’s leading brands. It has also established robust capabilities that will enable it to gain market share moving ahead. However, prevailing uncertainties in large economies continue to pose short-term headwinds to the growth prospects of