Brokerages maintained bullish calls on Tata Consultancy Services (TCS) stock despite its Q2 FY25 results falling short of Street expectations, with up to 28 percent upside in the share price targets. Analysts cited the ongoing BSNL contract, recovery in the US BFSI sector, and potential margin improvements as key positives, with a consensus that the IT major is well-positioned for recovery in the coming quarters.

TCS share price fell 0.7 percent on Friday and was trading at Rs 4,199 on NSE. The stock extended the previous session's 0.6 percent fall.

Brokerage analysts noted that a slow demand recovery and margin contraction hit TCS's second-quarter earnings. HSBC said that a "painfully slow demand recovery" and client-specific challenges led to a "rare margin fall", driven by weak sequential revenue growth. Jefferies also cited lower growth in North America and a margin miss as significant negatives. JPMorgan raised concerns about the lack of a broad-based macro recovery.

However, going forward, brokerages expect improvements in the second half. JP Morgan expects financial solutions and tech growth recovery to aid revenue, while both JP Morgan and Jefferies expect BSNL deal unwinding to help margin improvement.

HSBC kept its 'Buy' rating on TCS with a share price target of Rs 4,540. The IT major saw marginal revenue growth due to slow demand recovery, and a rare decline in margins in the second quarter. Despite these challenges, the brokerage finds TCS as the ‘best-managed’ company in the sector, warranting a relative preference over peers.

JPMorgan maintained an 'Overweight' call on TCS shares with a higher target price of Rs 5,100, with an upside of 21 percent. It noted several "knotty one-offs" in the second quarter but with silver linings for the future. The brokerage expects TCS growth to pick up in the second half of the year, driven by financial solutions and technology. The BSNL contract’s unwind is anticipated to help restore margins to traditional levels. JPMorgan recommended adding to positions in case of any sharp corrections.

Motilal Oswal (MOSL) has a 'Buy' rating and a higher target price of Rs 5,400, with an upside of 28 percent for TCS shares, noting that the BSNL ramp-up continues to fuel growth, while the US BFSI recovery is on track. Although the company saw a 60-basis-point decline in EBIT margin due to higher passthrough revenues, MOSL expects sequential margin improvement as wage hikes are now behind. It believes the large deal ramp-ups, including BSNL, should support revenue growth throughout FY25.

Jefferies kept a 'Buy' recommendation on TCS stock but cut its target price to Rs 4,735, citing slower-than-expected growth in North America and a margin miss as key negatives. However, the brokerage sees steady hiring and recovery in BFSI as positive signs. Jefferies anticipates an 11 percent EPS compound annual growth rate (CAGR) over FY25-27, despite lowering its earnings estimates by 1-2 percent.

However, Nomura has a ‘Neutral’ call on TCS stock, with a share price target of Rs 4,150, indicating a marginal downside. Its analysts noted a significant margin miss and contraction in TCV (total contract value) for TCS.