HCLTech shares fall 10% to a 52-week low, marking their worst single-day return in 11 years

Shares of HCLTech Ltd. fell as much as 9% in early trading on Wednesday, April 22, after the stock was downgraded by analysts, who also cut their price targets in response to a weak performance in the fourth quarter.

INCRED has downgraded HCLTech to "reduce" and has cut its price target to ₹1,275 from ₹1,616 earlier. It said that cautious management commentary, structural challenges, soft bookings and guidance drives a cut in their revenue assumptions.

Nuvama has downgraded the stock to "hold" from its earlier rating of "buy" and cut its price target on the stock to ₹1,400 from ₹1,550 earlier.

According to Nuvama, HCLTech's weak guidance for FY27 now converges its growth differential with TCS and Infosys, which is likely to lead to convergence of their valuations. The brokerage has cut growth estimates and revised its USD-INR assumption to 93 from 88 earlier.

HSBC has maintained its "hold" rating on the stock but cut its price target to 1,480 from 1,560 earlier, stating that earnings growth and stock returns are unlikely to compound in double digits going forward.

JPMorgan has maintained its "neutral" stance on the stock with price target cut to ₹1,370 from ₹1,419 earlier. It said that the impact of the telecom softness and SAP project cancellations is likely to persist in the new financial year.

The company also intends to invest forex gains into sales and overall GenAI capabilities, which also throttles any margin expansion expectations for the new year, JPMorgan said.

Nomura has maintained its "buy" rating on the stock but cut its price target to ₹1,600 from ₹1,700 earlier. Although Nomura expects margins to normalize in the current financial year, it has cut its financial year 2027-2028 Earnings Per Share (EPS) estimates by 5% to 7% to factor in the lower growth.

HCLTech's results were weak across parameters for the fourth quarter.

Firstly, the company's fourth quarter performance was weak. It reported a constant currency revenue decline of 3.3%, compared to a drop of close to 1%. Margins at 16.5% were also below expectations of 17.6%.

As a result, the company missed its financial year 2026 revenue growth guidance. What was projected to be a growth between 4% to 4.5%, turned out to be 3.9% for the year. Incidentally, during their December quarter results, the company had raised its revenue growth guidance for the year to this figure from 3% to 5% earlier.

Secondly, their guidance for the new financial year also missed expectations. The company expects constant currency revenue growth to be between 1% to 4%, while analyst projections had pegged the figure to be between 3% to 6%.

HCLTech's profit decline for the full year was the first in 16 years. You can read more on that here.

The only positives, if any, were the fact that the financial year 2027 margin guidance was raised to 17.5% to 18.5% from 17% to 18% earlier, and that revenue from the Advanced AI segment rose by 6.1% on a sequential basis in constant currency terms to $155 million.

HCLTech's management in its post-earnings call mentioned that there has been a reduction in discretionary spending in the telecom vertical and that two SAP projects got discontinued towards the end of the fourth quarter.

The management went on to add that some clients also scaled back discretionary spending and this impact could be felt in the first quarter of the new financial year as well. With business environment remaining fluid, the management said that it is difficult to form a view for the next 12 months.

47 analysts have coverage on HCLTech, of which 19 have a "buy" rating, 15 say "hold" and 13 have a "sell" recommendation on the stock.

Shares of HCLTech are down 8.6% in early trading on Wednesday at ₹1,318.8. Before today's session, the stock was down 19% from its recent 52-week high.