DXC Technology shares were in a free fall after a series of downgrades from Wall Street firms, following the release of a disappointing earnings report. The negative sentiment surrounding the information technology consulting firm has taken a toll on its stock price, which plummeted by 28% to reach $19.57 in Thursday morning trading. This represents the lowest close since November 9, 2020, when the stock closed at $19.54, according to Dow Jones Market Data. DXC Technology also emerged as the top decliner in the S&P 500.
TD Cowen analysts, in their Thursday report, downgraded shares of DXC (ticker: DXC) from Outperform to Market Perform. They not only trimmed their price target from $34 to $25 but also revised their estimates downwards. While DXC Technology has shown improvements in various segments of its business over the past few years, analysts noted that inconsistent fundamental performance continues to persist. The disappointing first-quarter results and the subsequent guidance slash have made it increasingly challenging to support their thesis, which was primarily focused on revenue growth and positive strides in other areas.
Deutsche Bank Downgrades DXC Technology Shares
Analysts from Deutsche Bank have downgraded shares of DXC Technology Company (DXC) from Buy to Hold, lowering their price target from $35 to $23. This comes after a previous upgrade in March 2021, when the bank expressed optimism about the company’s turnaround under the leadership of CEO Mike Salvino. However, recent progress has been perceived as stalling and even reversing.
Deutsche Bank notes that although there have been improvements in margins and free cash flow, the transformation journey seems to be plagued by setbacks and uncertainties. The CEO’s optimism about the road ahead is no longer convincing to the analysts.
In the first quarter, DXC reported adjusted earnings per share of 63 cents, falling short of the analysts’ forecast of 82 cents per share. The company attributed this to a slowdown in client purchases, particularly discretionary ones such as the resale of IT equipment and services project work. Revenue also declined compared to the previous year due to a challenging economic environment.
According to FactSet, a majority of analysts are currently rating DXC shares as Neutral (73%), while 13% rate them as Buy and another 13% as Sell.
