Global brokerage firm Goldman Sachs has reduced its price targets on Indian IT stocks by 3% to 32%, citing lower revenue growth forecasts driven by macroeconomic uncertainty in the US.
According to an ET report, the brokerage noted that the US accounts for around 60% of India’s IT revenues, and the downgrade in GDP forecasts for the world’s largest economy, along with the increased possibility of a recession caused by tariffs and Accenture’s indication of heightened uncertainty, led to the cut in target prices.
Goldman downgraded LTIMindtree to ‘Neutral’ from ‘Buy,’ stating that “we downgrade LTIMindtree given reduced near-term growth and margin visibility due to the company’s higher discretionary exposure vs peers, premium valuations vs sector and a more balanced risk-reward.” The company’s elevated exposure to discretionary spending and premium valuations were key factors in the downgrade, according to the brokerage.
On Tata Consultancy Services (TCS), Goldman Sachs pointed out that the company is “poised better than its peers” due to its diversified revenue base, potential benefits from vendor consolidation, and “reasonably high margin visibility.” TCS is seen as better positioned compared to peers such as Wipro and Tech Mahindra, which are likely to face a more significant negative impact from growth challenges and vendor consolidation.
Goldman analysts also highlighted the challenges ahead: “The recovery in discretionary spending, which has remained muted for the last two years, could be delayed further on account of slower decision-making potentially translating into pauses/deferral of IT spending by enterprises.” Additionally, they warned that a prolonged macroeconomic downturn could lead to “project re-scoping or cancellations,” which would further put pressure on India’s IT sector multiples.
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