You’ve likely heard of DXC Technology as one of the largest and fastest growing names in IT consulting services. It emerged from the 2017 merger between Computer Sciences Corporation (CSC) and the enterprise services division of Hewlett Packard Enterprise.
DXC Technology ranked in Thomson Reuters Top 100 Global Technology Leader in 2018 and number 3 in CRN 2019 Solution Provider 500. As a giant in the IT consulting sector, it has set itself up as a favorite stock for day trading with big plans.
What Is DXC Technology Stock?
DXC Technology (NYSE: DXC) is an information technology specialist company. They modernize and integrate mainstream IT digital solutions for their clients. DXC’s niche is helping multi-national companies build their digital platform for better performance and execution. With an extensive client list of 6,000 private and public-sector clientele in 70 countries around the world, it has come a long way since its inception in 2017.
DXC Technology is one of 641 stocks in the Computer and Technology sector as well as one of 28 companies in the Computers – IT Services industry. DXC Technology has been a Fortune 500 company for two years and is on the S&P 500 Index.
It operates through three divisions: Global Business Services (GBS), Global Infrastructure Services (GIS), and the United States Public Sector (USPS). First, Global Business Services focuses on industry software and solutions. On the other hand, the Global Infrastructure Services offer cloud and platform services as well as security solutions. Finally, the United States Public Sector delivers IT and business services to various levels of government in the United States.
One aspect that sets DXC Technology apart is its industry-leading partner network. Its strategic partners include AT&T Business and Amazon Web Services, where its solution partners involve Lenovo, Citrix, and Cisco. Additionally, DXC has channel sales partners as well as supplier and reseller partners. Each industry-leading partner strives to meet and exceed client challenges and expectations.
With about 137,000 employees worldwide, there are a few key executives of DXC Technology Company that manage the firm.
- John Michael Lawrie is the chairman, president, and Chief Executive Officer of DXC Technology. He was previously the chairman, president, and CEO of Computer Sciences Corporation (CSC) before it merged with Hewlett Packard Enterprise. He has 30 years of industry knowledge and impressive senior level management experience with a reputation for revitalizing multifaceted global companies.
- Paul N. Saleh is the Executive Vice President and Chief Financial Officer of DXC and is responsible for DXC’s worldwide finance operations. He was the Executive Vice President and Chief Financial Officer of CSC in May 2012.
- James R. Smith Jr. is the Executive Vice President of Digital Transformation and Customer Advocacy. He connects clients, DXC Technology, and its ecosystem of partners.
- William L. Deckelman Jr. is the Executive Vice President of General Counsel and Secretary. He is the principal counsel and advisor to DXC Technology and is responsible for all legal activities as well as government and regulatory matters.
DXC Technology Stock Price History and Trends
At the time of its creation in 2017, DXC Technology had anticipated annual revenue of $26 billion. Unfortunately, in recent years, DXC Technology has seen drops in revenue, resulting in falling DXC Technology Stock prices. For example, in November 2018, DXC reported an 8 percent drop in quarterly revenue, resulting in a 12 percent drop in share prices.
Fortunately, Cowen analyst Bryan Bergin wrote a note to investors that reassured them that what they have is a coherent plan, such as scaling up newly developed tech platforms. Investors remained skeptical despite DXC consistently surpassing Wall Street’s earnings estimates for all of 2018.
DXC Technology has not disappointed. In January 2019, DXC made a deal to purchase Luxoft Holding for $2 billion. The buyout hopes to improve the company’s growth by taking full advantage of Luxoft’s digital capabilities and expertise. Following the announcement, DXC Technology Stock gained 21 percent, compared to the S&P 500’s modest spike of 8 percent.
In March 2019, DXC Technology reported $20.735 billion in annual revenue, which is still a 4.51 percent decline year-over-year. The company believes that the Luxoft acquisition should help boost sales in early 2020.
In most recent news, DXC Technology Stock rose after it announced its 2019 first-quarter earnings, which beat estimates. It also recently raised its dividend to $0.21 per share. Stock prices rose nearly 5 percent in the extended session after the announcement.
DXC Technology Risks and Analyst Predictions
Even with the fall in revenue in the past two years, analysts predict that DXC will grow its earnings at a 10.43% annual rate in the next five years. With an EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin of 19.83% and a Return on Investment (ROI) of 8.40%, experts predict that DXC is set up to be quite profitable.
In the last year, DXC has minimized its total debt from $8.5 billion to $7.6 billion. Its current debt ratio to its liabilities is 1.00, indicating that it can cover its immediate obligations over the next 12 months and has a low financial risk. This may be a sign of increased operational efficiency.
Unfortunately, DXC has a debt reaching 67 percent of equity. In other words, DXC Technology is considered highly leveraged or a large-cap company. Despite its debt load, large-cap companies tend to have better financing and tax deductibility, making DXC a safe investment.
One concern of investors is the fact that DXC Technology Stock is relatively young, which is significant investing in tech stocks. After all, DXC Technology is really only two years old with a limited, but solid track record. Additionally, DXC’s has been particularly volatile these past few months. Last month, DXC Technology had price volatility of 1.89 percent. Although historical volatility does not indicate a directional trend, it does predict how far a stock may move in the future. Without a long track record, investors are limited with their ability to truly evaluate DXC’s ability to maneuver through challenges and economic changes.
As of June 2019, its 200-day moving average is $68.14, while the 50-day moving average is $59.39. Currently, the DXC Technology Stock price hovers at -27.82 percent below its 200-day moving average, indicating a possible continued downward trend.
Class Action Lawsuit
Technical indicators aside, analysts are also keeping an eye on a potential class action lawsuit. In January 2019, a class action lawsuit was filed for investors that purchased DXC Technology Company securities between February 8, 2018 and November 6, 2018.
It seeks to recover damages for DXC Technology investors for alleged violations of the federal securities laws under the Securities Exchange Act of 1934. The main allegations include that the Company failed to disclose changes that affected the operations of sales team to cut costs, which resulted in a shortage of sales personnel to execute services and misrepresented their revenue and financial performance guidance for the fiscal year of 2019.
The lawsuit cites how Karan Puri, the Executive Vice President and General Manager of the Americas was let go, supposedly due to the region’s double-digit decline in revenue. Afterward, the stock price fell 16 percent.
Approximately two weeks later, DXC Technology reported its second quarter 2019 earnings call, stating their plan to reduce its revenue outlook by $800 million. Not surprisingly, the stock price fell 13 percent.
The plaintiffs of this suit feel that DXC made materially false public statements and misled the investors, which resulted in financial damages.
Additionally, this class action lawsuit is amidst several other litigations. A federal discrimination suit resulted after DXC acquired Molina Medicaid, a health-care company, last year. DXC Technology terminated a 56-year-old African American woman despite allegedly stating that no employees would lose their jobs as a result of the purchase.
This discrimination lawsuit follows another legal battle with former Executive Vice President Stephen Hilton. Hilton accuses DXC Technologies of seven counts of breach of contract and seeks damages in the millions.
Amidst lawsuits that accuse the CEO of breach of contract and the Company of racial, age, and gender discrimination, this new class action lawsuit can greatly diminish investor confidence.
DXC Technology Stock Price
DXC Technology Stock closed at $53.95. DXC’s 52 week high is $96.75. Some estimate the intrinsic value of the stock may be $120.51. However, after factoring in the potential lift from the Luxoft acquisition, its high growth potential, and current undervaluation, DXC Technology Stock may be a bargain opportunity.
DXC’s niche in the technology is impressive. They have global clients primarily in North America, Europe, Australia, and Asia and outperformed its computer and technology peers in terms of year-to-date returns.
While the company is still young, DXC Technology Stock has excellent potential. As a result, it is possible for investors to capitalize on the fact that the market currently undervalues DXC. Despite declining revenue, the acquisition of Luxoft as well as DXC Technology’s expanding presence in Asia may result in a favorable investment.
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