Freedom Broker has put out a short-term trade idea on IT services and consulting company DXC Technology. Over a two-month horizon, shares could rise 23%. The stock has been under pressure in recent years and are now undervalued as the company reduces debt, allowing for increased distributions to shareholders, Freedom Broker argues.

Details

In a note seen by Oninvest, Freedom Broker has set a target price for DXC Technology, whose solutions are said to help global companies to run their mission-critical systems and operations, is $18 per share on a two-month horizon. That implies upside of 23% versus the close yesterday, July 24.

Freedom Broker recommends buying DXC stock but allocating no more than 2% of your portfolio to it. 

At the open today, the stock lost 0.9% as of this writing.

Freedom's rationale

DXC has resumed share buybacks, on which it plans to spend $150 million in fiscal 2026, which started in April, Freedom Broker notes. This was made possible by a strengthening financial position. Last year, the company reduced net debt by $785 million, or 27.4%, leading to an 11% reduction in interest expenses to $265 million. DXC is due to redeem EUR700 million in bonds in January, after which it will shift its focus from deleveraging to returning cash to shareholders through buybacks, Freedom Broker expects. 

Freedom Broker's second argument is that DXC stock is cheap on key multiples given the nearly 27% decline in the company's market value year to date. This year, analysts at three investment firms have lowered their target prices on DXC, according to Yahoo Finance. The average target price now is $16.50 per share, for upside of 13% versus current quotes.

The most common recommendation on DXC is "hold" (nine analysts), according to MarketWatch. Meanwhile, there are three "sells" and no "buys."

The AI translation of this story was reviewed by a human editor.

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