Shares of Tech Mahindra Ltd. declined as much as 4% in trade Friday, July 26. Analysts from multiple brokerage firms have adopted a mixed stance on the stock’s performance, despite the IT services major reporting a decent set of numbers in Q1.

Brokerage firm Nuvama Institutional Equities maintained its ‘Reduce’ recommendation on the stock, as it continues to anticipate near-term pain before any long-term gain. However, it has raised the price target to ₹1,200 from ₹1,000 earlier.

Nuvama wrote that while Tech Mahindra’s first quarter following MD and CEO Mohit Joshi’s strategy presentation was a decent one — overcoming its Q1 seasonality, the road ahead to reach its target will be quite challenging.

“Growth shall be difficult with telecom still forming 33% of revenue while margins are likely to face headwinds (building bench strength, investing in growth) before tailwinds (employee pyramid, subcontracting costs),” the brokerage noted.

Kotak Institutional Equities has retained its ‘Reduce’ rating on the Tech Mahindra stock, but raised its price target to ₹1,400 per share.

According to Kotak, Tech Mahindra is on the right track in its turnaround journey. It has begun well. Demand environment has improved in pockets that will help.

The brokerage mentioned that the turnaround journey will have bumps along the way—e.g. it will have to navigate challenges in telecom carefully.

The stock, on the other hand, is building flawless execution, reflected in its valuation converging with HCL Tech and showing only a marginal discount to Infosys. This assumption reduces the margin of safety, driving Kotak’s cautious stance on the stock.

The brokerage has baked in improvement in demand through 1-3% increase in revenues and EPS estimates.

On the flip side, Emkay Global has maintained its ‘Add’ rating and raised its price target to ₹1,650 per share from ₹1,425 earlier.

Emkay said that the management highlighted that its ‘speed at scale’ strategy is being well received by clients, and reiterated that FY25 should be better than FY24. The demand environment has remained fairly similar to last quarter’s, albeit seeing some improvement versus previous year.

With the company’s delivery execution to achieve its ‘Vision 2027’ strategy off to a solid start, Emkay has increased its target multiple to 22 times from 19 times.

Out of the 45 analysts that have coverage on Tech Mahindra, 21 of them have a ‘Buy’ rating, 10 of them say ‘Hold’, while 14 have a ‘Sell’ call. The consensus implies a potential downside of about 7% from current levels.

Shares of Tech Mahindra Ltd. have recovered from day’s low and are trading 2.21% lower at ₹1,496.15. The stock has gained over 15% so far in 2024.