TCS shares surge over 2% in trade after brokerage firm Macquarie turns bullish on the stock. Shares of TCS hit an intraday high of Rs 4,563.14 against its previous close of Rs 4,490. As of 10:00 AM, TCS share price was at Rs 4,554, up 1.4% on the NSE. Macquarie has upgraded its rating on Tata Consultancy Services (TCS) to Outperform and raised the target price to Rs 5,740, up from Rs 4,750.
This revision reflects an increased valuation multiple, with Macquarie now valuing TCS at 35 times its FY26 estimated earnings per share, compared to the previous multiple of 29 times.
The upgrade also includes adding TCS to its Marquee idea list, highlighting the firm’s strong growth prospects driven by its advancements in artificial intelligence (AI).
AI-Driven Legacy Modernization and Autonomous Vehicles
Macquarie attended a recent briefing where TCS showcased its significant investments in AI, particularly its innovative approach to legacy modernization. TCS has developed a legacy modernization framework that leverages AI to enhance accuracy and reduce costs. This advancement is expected to tap into a substantial market for modernizing outdated systems, offering potential for significant revenue growth.
Additionally, TCS demonstrated its AI-based Autonomous Vehicle Platform, which features an advanced algorithm supporting over 50 functionalities. This platform underscores TCS’s commitment to pushing the boundaries of AI technology and its applications in emerging sectors.
Strong R&D Commitment and Broad Service Portfolio
TCS continues to invest heavily in research and development, allocating 1.0-1.2% of its revenue to R&D, which translates to over US$300 million annually. Despite this high expenditure, the investment is seen as strategically crucial given TCS’s expansive portfolio of services and global reach.
Macquarie views TCS as possessing one of the broadest service portfolios and geographic coverage in the industry, positioning the company to maintain a low risk profile and continued growth. This comprehensive approach is expected to support TCS’s resilience and expansion in the competitive tech landscape.
With its enhanced valuation and promising advancements in AI, TCS is poised for significant growth, making it a standout investment opportunity according to Macquarie.
