Multibagger IT stock surges today. Brokerages have 'buy' tag

IT stock Persistent Systems shares have given multibagger return in a year. Photo: iStock

2 min read . Updated: 16 Mar 2022, 12:08 PM IST Livemint

Brokerage Emkay has a Buy rating on the multibagger IT stock with a target price of ₹4,600 per share

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Shares of Persistent Systems surged in Wednesday's deals after the IT company announced the acquisition of US-based MediaAgility and its subsidiaries for nearly $72 million. Through this acquisition, the company will enhance its partnership with Google, and the deal will be the foundation for a dedicated Google business unit.

The deal accelerates and deepens Persistent's Google Cloud competencies, and bolsters its vertical and industry solution capabilities within the Google Cloud ecosystem, said analysts at Emkay in a note. The transaction does not require any government or regulatory approvals and is expected to close within 6-8 weeks.

“The transaction is expected to add ~3% revenue in FY23, but it will be low single-digit dilutive to EPS due to a 45-50 bps EBITM impact (employee retention payment, amortization charges) and lower other income," Emkay's note added. Brokerage Emkay has a Buy rating on the multibagger stock with a target price of ₹4,600 per share.

There is a strong opportunity for cross-selling and upselling as there is not much overlap between Persistent Systems and MediaAgility’s clients and capabilities.

“MediaAgility will enhance Persistent’s partnership with Google and act as a foundation for its dedicated Google business unit. Management says the acquisition will have a gross impact of 45-50 bps at the EBIT level. We hold to our estimates as the sales integration benefit would be offset by pay-outs/lower other income," said another brokerage house Anand Rathi. It has retained its Hold rating on the IT stock with an unchanged target price of ₹4,640.

The company's management clarified about going slow on M&A as it builds enterprise capabilities on the two large ecosystems – Microsoft and Google. It has also spent $222 m on M&A (incl. earnouts) and, hence, may remain FCF negative through FY22 and FY23, highlighted Anand Rathi.

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The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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