JPMorgan Stays Bearish On DXC Technology, Cites CEO Disruption, Legacy Drag

JPMorgan analyst Tien-tsin Huang maintained an Underweight rating on DXC Technology Company (NYSE:DXC) with a price target of $22.

On Thursday, DXC Technology reported quarterly earnings of 84 cents per share, which beat the consensus estimate of 77 cents. Quarterly revenue clocked in at $3.17 billion, which beat the Street estimate of $3.13 billion.

DXC Technology sees first-quarter adjusted EPS of between 55 cents and 65 cents per share, versus the 77 cent analyst estimate, and revenue in a range of $3.04 billion to $3.09 billion, versus the $3.12 billion estimate.

The analyst says that a bearish stance reflects that turnaround plans in people-based businesses are difficult to execute, especially in a tightening supply market.

Additionally, CEO disruption poses a risk of further executive departures that could lead to disruption in business results, adds the analyst.

Moreover, Huang writes that DXC faces the heavy weight of its legacy business, which is declining rapidly and could delay the transition point when growth turns positive.

The analyst estimates EPS for FY25 to be $3.33 and for FY26 to be $3.08.

Last week, several analysts slashed their price forecast on the company following the results.

Taking about the sector, the analyst noted that the overall growth in IT services was mixed.

The analyst highlighted that the sector is currently experiencing a historically long period of below-average organic revenue growth, and they are awaiting a normalization, which is anticipated to be driven by widespread enterprise adoption of AI and the eventual recovery of discretionary spending.

In the interim, large-scale transformation deals will need to continue to be the primary growth drivers, as they have been for the past several quarters, adds the analyst.

DXC Price Action: DXC Technology shares are down 0.52% at $15.18 at publication on Monday.

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