Tata Group stock, down 54% from peak, gets an upgrade from JPMorgan on better demand

Shares of Tata Technologies Ltd., the Tata Group stock down significantly from its peak, are trading with gains of close to 4% on Tuesday, January 7, after brokerage firm JPMorgan upgraded the stock.

Tata Technologies has been upgraded by JPMorgan to "neutral" from its earlier rating of "underweight" and also raised its price target to ₹710 from ₹570 earlier. The revised price target implies an upside potential of 10% from Tuesday's closing levels.

JPMorgan has upgraded its revenue estimates for Tata Tech over financial year 2026-2028 by 2% to 8% and its margin estimates by 70 basis points to 90 basis points, thereby leading to an Earnings per Share (EPS) upgrade between 2% to 6%. Out of this, organic revenue and EPS increase is 2%, while the rest is to factor in the ES-Tec acquisition.

Tata Technologies' organic revenue upgrades are driven by improving auto Engineering Research & Development (ER&D) demand, particularly in the European Union, which is Tata Tech's biggest market.

"The stock has underperformed and we believe earnings upgrades should follow an improving demand environment, keeping further downside limited from here," JPMorgan's note stated.

At 34 times price-to-earnings, the stock now trades on par with KPIT Tech, where growth is higher, and therefore, JPMorgan preferred to remain "neutral" on the stock. However, it has raised its target price-to-earnings multiple to 32 times from 28 times earlier, to factor in the earnings upgrades.

Tata Technologies is among the Tata Group stocks with the most bearish street recommendations, along with Tata Elxsi. Nearly two-thirds of the analysts tracking the company have a "sell" rating on the stock. 12 out of the 18 analysts have a "sell" rating, five say "hold", while only one solitary analyst has a "buy" rating on the stock.

Shares of Tata Technologies are trading 4.5% higher on Wednesday at ₹678.2. The stock had made a post-listing high of ₹1,400 in November 2023, before collapsing from the peak and fall to a 52-week low of ₹597, which is close to its IPO price of ₹500 apiece. Even at yesterday's close, the stock was down over 54% from those ₹1,400 levels.