Asset management firm Apollo Global Management (NYSE:APO) and Kyndryl Holdings (NYSE:KD), a provider of information technology (IT) infrastructure services, are reportedly in advanced talks to jointly bid for DXC Technology (NYSE:DXC). According to a Reuters report, they could value DXC between $22 and $25 per share, representing a significant premium over its closing price of $16.55.
Shares of DXC Technology, which provides a broad range of IT services, closed 11.48% higher on June 10 after the news. Further, DXC stock gained 4.34% in after-hours trading. The company has a market cap of $3.3 billion.
DXC Struggling to Grow Sales
This potential acquisition comes at a challenging time for DXC Technology, which has been struggling with sales growth. Macro headwinds have impacted IT spending, negatively affecting revenue and growth for IT service providers like DXC.
Over the past two fiscal years, DXC’s revenue has declined. In Q4 of Fiscal 2024, its revenues fell by 5.7% year-over-year. Looking ahead, the company forecasts a 4-6% decrease in organic revenue for Fiscal 2025. This shows the pressure on its top line will likely be sustained.
To counter these challenges, DXC is focusing on cost reduction and implementing restructuring initiatives to safeguard its margins. Additionally, the company is exploring the sale of its insurance software division for over $2 billion, as the report highlighted.
Is DXC a Good Stock to Buy?
DXC stock has lost nearly 31% of its value in one year, reflecting declining sales. Given the ongoing macro headwinds, Wall Street analysts prefer to remain sidelined on DXC Technology stock.
With eight Holds and one Sell recommendation, DXC stock has a Hold consensus rating. The analysts’ price target on DXC stock is $18.28, implying 0.92% downside potential from current levels.
