Welcome to Extreme Investor Network, your go-to source for all things finance. Today, we are discussing the recent news surrounding DXC Technology and the impact it has had on the market.
Shares of DXC Technology took a nosedive, dropping 18% after the IT services provider announced a revamp and forecasted revenue and profit for fiscal 2025 below expectations. This downward spiral comes after a failed sale bid last year, along with the departure of top executives and struggles to transition from traditional IT outsourcing services to cloud-based solutions.
Analysts at RBC Capital Markets have raised concerns about DXC’s ability to turn things around, despite multiple restructuring efforts in recent years. The latest restructuring plan, which will cost an additional $250 million in fiscal 2025, aims to streamline the business and reduce excess capacity in its legacy operations.
The newly appointed finance chief, Robert Del Bene, shared during a post-earnings call that the restructuring will impact DXC’s free cash flow, with the company projecting around $400 million for fiscal 2025 – a significant drop from the $756 million reported in FY24.
J.P. Morgan analysts have expressed skepticism about investor sentiment towards yet another restructuring, warning that stock tolerance may be low given the impact on free cash flow and share repurchases in FY25. The announcement of a $1 billion buyback in May 2023 has not been enough to offset the losses, with DXC’s shares already down 13% in 2024.
Market data shows that at least nine out of 14 analysts covering the stock have lowered their target prices in response to these developments, underscoring the challenges faced by DXC in the current market environment.
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