Tata Group stock could fall 25% after Q2 results, bearish analysts warn; Stock gives up gains

Shares of Tata Technologies Ltd. gained as much as 7% on Thursday, October 15, even as global investment banking firms erred on the side of caution after its second quarter results, which were reported after market hours on Wednesday.  The stock has given up all the gains soon after.

The Tata Group stock continues to have more "sell" recommendations compared to "buy", among the analysts who track the company.

While Goldman Sachs has reiterated its "sell" rating on the stock, while JPMorgan has upgraded its rating to "neutral" from its earlier "underweight" rating. The firm has also raised its price target for Tata Technologies.

Goldman Sachs Remains Bearish On Tata Tech

The investment banking firm has maintained its "sell" rating on the stock, with a target price of ₹560 per share. This indicates a downside of 25% from Wednesday's close.

It said the company reported an in-line second quarter with 1.9% sequential constant currency (CC) revenue growth. Its revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) were 1% and 3% below Goldman Sachs' estimates, respectively.

Going forward, the Tata Tech management expects sequential growth to continue through the year, driven by new business wins. The company secured a $138 million deal from a leading luxury European original equipment manufacturer (OEM). Tata Tech expects this deal to start ramping up in the second half of the financial year 2027.

Despite the third quarter estimated to be a seasonally weak quarter, Tata Technologies expects to see sequential margin improvement from the 16.1% EBITDA margin it delivered in the second quarter, Goldman Sachs said.

The management noted Volkswagen's recent challenges are causing its momentum at the recently-acquired ES-Tec, which is estimated to be 10% of its revenue, to represent a drag on growth and profitability in the near term.

The management reiterated its organic revenue growth guidance for double digits in FY27, Goldman Sachs said.

JPMorgan Upgrades Tata Technologies

JPMorgan has upgraded the stock to "neutral" from "underweight" and has raised its target price to ₹660 from ₹540. This indicates a downside of 11.7% from its previous close of ₹747.25 apiece.

It said the second quarter services revenues grew 4.3% CC sequentially, which was ahead of the investment banking firm's estimate of 4% and excluding Es-Tec growth was even stronger at 7%.

Tata Technologies announced a new large deal of $128 million total commercial value (TCV) over two-and-a-half years with a EU luxury OEM that will start ramping up from the third quarter onwards and can add 7% to its FY28 growth, JPMorgan said.

The EU OEM as well as Japanese OEM deal, which it won earlier, provide visibility on growth over the next 18 months and JPMorgan now expects Tata Tech to grow fastest in coverage at organic CC revenue compound annual growth rate (CAGR) of 16% over FY26-29.

Tata Technologies A Buy Or Sell?

Of the 18 analysts who have coverage on the Tata Technologies stock, four have a "buy" recommendation, while five have a "hold" rating and nine have a "sell" rating.

Having gained as much as 7% in early trade to make an intraday high of ₹807.55, the stock has given up all the gains to trade 0.7% higher at ₹750.55. The stock is up 16.5% so far this year.

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