HCL Technologies' AI Strategy Boosts Shares and Analyst Outlook

HCL Technologies' full-stack AI strategy boosts shares outlook, says BofA By Investing.com

On Friday, BofA Securities increased the price target on HCL Technologies (HCLT:IN) shares from INR1,600.00 to INR1,750.00, maintaining a Neutral rating on the stock. The adjustment reflects the company's proactive strategy in adopting GenAI-led delivery transformation and offering full-stack AI solutions to its customers. HCL Technologies is focusing on leveraging artificial intelligence to enhance legacy modernization, build data services such as data pipelines, and develop industry-specific AI applications. The company's approach is designed to not only improve its profitability by retaining a portion of the efficiency gains but also to compensate for any potential deflation in its traditional services. The exact impact of such deflation on the company's finances, however, remains uncertain. The CEO of HCL Technologies has indicated that, unlike the initial phase of the cloud era where smaller specialists saw greater benefits, more significant vendors might have the upper hand in the emerging GenAI era. This advantage is expected to stem from their superior automation capabilities and in-depth process knowledge. BofA Securities has based the new price target on a 26 times multiple of HCL's estimated earnings per share for the financial year 2026, an increase from the previous 24 times multiple. The firm's analyst cites the company's improved medium-term growth prospects as the reason for this uplift in valuation. HCL Technologies' strategy to integrate AI into its service offerings is aimed at staying ahead in a rapidly evolving technological landscape. The company's focus on GenAI and AI-driven solutions is a response to the shifting demands in the IT services industry.

Kotak sees HCL stock upside with strategic focus on AI and cost levers By Investing.com

On Thursday, Kotak Securities adjusted its outlook on HCL Technologies (HCLT:IN), increasing the price target to INR 1,740 from INR 1,675. The firm sustained its 'Add' rating on the stock. This revision follows HCL Technologies' investor day event, where the company outlined its strategic focus areas for medium-term growth, cost reduction strategies to fund investments and enhance margins, and a proactive approach to adopting generative AI to increase its market share. During the event, HCL Technologies emphasized its commitment to growth, detailing specific areas it plans to target. The company also highlighted the cost take-out levers it will utilize to support its investment strategies. These levers are expected to help in expanding the company's profit margins. Additionally, HCL Technologies showcased its proactive stance on the adoption of generative AI, which is anticipated to play a crucial role in the company's efforts to capture a larger portion of the market. The analyst from Kotak noted that HCL Technologies' strategy appears logical but pointed out that it includes elements that may not directly play to the company's existing strengths, such as enterprise applications. This could imply that HCL Technologies might need to make further investments in these areas. Despite these challenges, the company's willingness to take calculated risks to enhance its market position was evident. Kotak's analyst also mentioned that the quantification of efficiency benefits from generative AI and the commentary on proactive cost reduction proposals indicate HCL Technologies' increased readiness to undertake riskier initiatives in order to expand its market share. In conclusion, Kotak Securities reaffirmed its 'Add' rating on HCL Technologies, with the revised fair value of INR 1,740 reflecting the company's strategic initiatives and potential for growth in the market. The increased price target is based on the company's investor day revelations and its aggressive stance on adopting new technologies to improve efficiency and competitiveness.

HCLTech shares rise on positive analyst outlook

HCLTech shares have climbed 1.55 per cent to ₹1,746.10 on the NSE following positive analyst reports. Morgan Stanley maintained an Overweight rating with a target price of ₹1,705, citing the management's positive near-term outlook, particularly in the financial services vertical. The firm noted HCLTech's balanced portfolio and focus on wallet share gains. Jefferies reiterated a Hold rating with a ₹1,630 target, highlighting HCLTech's medium-term strategy aimed at industry-leading organic growth. The company expects double-digit growth in the medium term and views generative AI as a growth and margin lever. This follows HCLTech's recent announcement of an extended partnership with Xerox to drive innovation using AI and digital engineering services. The collaboration aims to support Xerox's organisational reinvention and improve key business metrics. SHARE Copy linkEmailFacebookTwitterTelegramLinkedInWhatsAppRedditPublished on August 29, 2024