Tata Elxsi shares delivered negative returns in two years; Rs 5,400 or Rs 9,000 price targets likely?

Shares of multibagger Tata Elxsi Ltd have delivered negative returns to investors in two years. The BSE IT index slipped nearly 1% in two years. The Tata Group stock fell 14% during the period against a 28% rise in Sensex in two years. This year too, the Tata Elxsi stock is down 11.06%, signalling  weakness in the IT stock in the short term.

In the previous session, Tata Elxsi stock ended 1.43% higher at Rs 7779.60. Market cap of the IT firm rose to Rs 48,448.58 crore.

The large cap stock hit a 52-week low of Rs 5900 on March 29, 2023 and a 52 week high of Rs 9191.10 on December 18, 2023.

It opened higher at Rs 7750.10 against the previous close of Rs 7669.85 on BSE. Total 8741 shares of the firm changed hands amounting to a turnover of Rs 6.81 crore on BSE.

Tata Elxsi stock has a one-year beta of 0.3, indicating very low volatility during the period.

Vaishali Parekh, Vice-President - Technical Research at Prabhudas Lilladher has a 'Buy' call on Tata Elxsi for targets of Rs 8,600-9,000. "The stock has been in the consolidation phase for some time between Rs 7,400 and Rs 7,900 levels, with good support maintained near the Rs 7,350 zone. Currently, there is tough resistance seen at Rs 7,840. A decisive breach is required for further upward move. We suggest buying and accumulating this stock for upside targets of Rs 8,600–9,000, keeping stop loss placed at Rs 7,200," said Parekh.

Kotak Institutional Equities has a sell rating on the stock with a target of Rs 5400. Revenue growth of the Tata Group firm will be hit due to constrained addressable market and business churn at Tier-1 suppliers, according to the brokerage.

"We cut FY2025-26E revenue and EPS estimates by 7-8 per cent, as we bake in a slowdown across Tata Elxsi's key verticals. Our analysis of automotive client spends indicates continued focus on cost efficiency by Tier-1 suppliers. Tata Elxsi derives nearly half of revenues within the transportation vertical from Tier-1 suppliers," said Kotak Institutional Equities.(KIE).

In terms of technicals, the relative strength index (RSI) of Tata Elxsi stands at 54, signaling it's trading neither in the overbought nor in the oversold zone. Tata Elxsi shares are trading higher than the 10 day, 20 day, 30 day, 50 day but lower than the 100 day and 150 day moving averages.

Tata Elxsi is a subsidiary of Tata Sons, holding company of the Tata Group. It provides design and technology services across industries including automotive, broadcast, communications, healthcare, and transportation. The company aims to help customers reimagine their products and services through design thinking and the application of digital technologies such as IoT (Internet of Things), cloud, mobility, virtual reality and artificial intelligence.