Persistent Systems share price jumps over 100% in last 1 year; what should investors do? Here’s what experts say | Stock Market News

Persistent Systems share price: Over the past few years, Persistent Systems has emerged as one of the top-performing large-cap stocks in the Indian stock market.

At a time when the Indian IT sector is facing the heat of subdued demand and curtailed client spending in the key Western markets, this stock has been on a record-setting spree.

On July 31, Persistent Systems reached a 52-week high of ₹4,962 on the BSE. Over the past year, the stock has gained an impressive 106 per cent. Its performance over a longer period has been solid, with a 1,819 per cent increase over the last 5 years and a 208 per cent rise over the last 3 years.

For the April-June quarter of the current financial year (Q1FY25), Persistent reported a 33.94 per cent year-on-year (YoY) rise in net profit at ₹306.41 crore.

Its revenue from operations for the quarter rose 17.92 per cent YoY to ₹2,737.17 crore, thanks to a healthy show of the banking, financial services and insurance (BFSI) segment, which saw an 8.9 per cent increase to ₹843.15 crore YoY.

Following the Q1 earnings, brokerage firm Motilal Oswal Financial Services upgraded the stock to a buy, with a target price of ₹5,700. The brokerage firm said the stock trades at an expensive valuation. Still, owing to its superior earnings growth trajectory on a PEG (price/earnings to growth) basis, the valuation still has room for an upside.

Brokerage firm JM Financial also upgraded the stock to a buy with a revised target price of ₹5,240 from ₹3,400. The brokerage firm said Persistent’s steadfast focus on growth, healthy pipeline and prospects of demand revival should help sustain revenue momentum.

Mint spoke to fundamental and technical experts to get insights into the stock’s prospects. Here’s what they said:

Fundamental views

Master Capital Services

Analysts of Master Capital Services pointed out that despite Persistent Systems’ advancements in AI technology, including filing a record number of patents, launching new segments in generative AI, and strategic acquisitions like Starfish Enterprises, the company’s outlook appears bearish.

“The slow pace of AI adaptation, pressures from wage hikes, and macroeconomic challenges are creating significant headwinds. While there is confidence in meeting a 14.5 per cent EBIT margin by the year’s end, the company’s cost optimisation efforts have only partially yielded results, leaving the majority of benefits yet to be realised,” they said.

“The emphasis on competing with tier 1 companies globally and maintaining operational efficiency under these conditions further underlines the challenges Persistent Systems faces in sustaining its growth trajectory.”

Avinash Gorakshakar, Head – Research, Profitmart Securities

Gorakshakar underscored that Persistent’s management expects the FY25 margin to be similar to that of FY24. He believes changes in the onsite-offsite mix, improved efficiency, and higher utilisation will likely drive margin by 200-300bps over the next 2-3 years.

“Looking ahead, we expect the company to sustain its industry-leading revenue growth momentum, considering the TCV deal wins and client addition, which has the potential to create a large, sustainable business,” said Gorakshakar.

“We believe Persistent is well-placed to capture the imminent opportunities in the IT sector, considering its track record of cashing in on emerging trends like AI and is well positioned ahead. We suggest a ‘hold’ on the stock for a 12 to 18-month timeframe,” Gorakshakar said.

Technical views

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers

Patel observed that Persistent is currently experiencing resistance around its previous high, near ₹4,950. This resistance level suggests the stock is struggling to break through this price point, possibly indicating a barrier to upward movement.

The stock is also significantly above all major moving averages, including the 21, 50, 100, and 200-day exponential moving averages (DEMA).

This positioning above key moving averages suggests the stock may be overextended, increasing the likelihood of a “reversion to the mean.” A reversion to the mean occurs when the price returns to its average level, indicating that the current price may not be sustainable in the short term.

“Given these conditions, adopting a cautious wait-and-watch approach is advisable. For those who have already invested in the stock, it may be prudent to book profits now and wait for a more substantial pullback before considering re-entry,” said Patel.

“Initiating new long positions should only be considered if the stock can decisively close above the ₹4,930 level on a closing basis, indicating a potential breakout and continuation of the upward trend,” said Patel.

Deven Mehata, Equity Research Analyst at Choice Broking

Mehata pointed out that the stock has recently entered a consolidation phase after a significant impulse move, suggesting that it is stabilising after a period of upward momentum.

“It remains on an overall uptrend, and a breakout above the recent highs could further extend this bullish trajectory. The Relative Strength Index (RSI) is at 61, which indicates that the stock is not overbought and that there is room for further upward movement,” Mehata said.

“The stock has witnessed a bounce from its short-term (20-day) exponential moving average (EMA), which signals strong support at these levels. For those holding long positions, it is advisable to maintain them with a stop loss set at ₹4,530 to manage risk,” said Mehata.

“Traders might consider adding to their positions if the stock dips to around ₹4,650. On the resistance front, the immediate level to watch is ₹4,950. A sustained move above this resistance could pave the way for further gains, potentially pushing the stock towards the next target range of ₹5,100 to ₹5,200,” said Mehata.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.