DXC Technology: Cautious Growth Outlook Justifies Hold Rating Amid Improved EBIT Margin Forecast and Weaker Bookings

Analyst James Faucette from Morgan Stanley maintained a Hold rating on DXC Technology (DXC – Research Report) and keeping the price target at $22.00.

James Faucette has given his Hold rating due to a combination of factors impacting DXC Technology. The company’s recent performance showed a better-than-expected organic decline and strong cost management, which led to an increase in the adjusted EBIT margin forecast for FY25. However, despite these positive aspects, there is concern over the deceleration in growth, particularly due to weaker bookings in the first half of FY25, which is expected to affect growth through FY26.
Although the book-to-bill ratio has improved, indicating potential future growth, the benefits from deal discipline are not anticipated to materialize in the short term. Additionally, while the Insurance Services and Software segment is performing well, contributing positively to revenue, the overall growth outlook remains cautious, justifying a Hold rating. The market conditions, including FX headwinds, have led to slight adjustments in revenue forecasts, and the $22 price target is maintained.

In another report released yesterday, TD Cowen also maintained a Hold rating on the stock with a $23.00 price target.