InvestorQ : Why is it that a lot of brokerages are cutting the price targets for TCS after the results?
sara Kunju made post

Why is it that a lot of brokerages are cutting the price targets for TCS after the results?

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1 year ago
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In the stock markets, the stock is not judged by the results that they announce but they are judged by how the results were with respect to expectation. In that context, the results of TCS were slower in terms of sales growth and profit growth in the June quarter. Also the sharp fall in the operating margins of the company has also not gone down too well with the analysts. Also, the IT industry is facing tough times due to visa challenges in the US. Most of the large IT companies have sharply increased their local recruitment in the US leading to sharply higher costs.

Apart from the lower than expected results of TCS, the analysts are also worried about two other things. Firstly, the buyback tax of 20% will make it difficult for cash rich companies to reward their shareholders in a tax efficient way. Secondly, the proposal by the government to increase the public shareholding to 35% has also not gone down well for the stock as a lot of its value comes from the limited floating stock in the market and that the Tata Sons exercises a near 75% control over the company. All these combined have led to downgrading of the stock.

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