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According to Chakri Lokapriya, CIO & MD, TCG AMC, the IT sector is likely to see a cut in earnings over the next two to three quarters. However, he believes that the growth outlook for the top line is still better than the five-year average, making the five-year average multiples look reasonable at this time. Despite concerns about valuation and margin growth expectations, investing in the IT sector may be a smart move for those who are willing to focus on the long-term potential of the industry. The demand for IT services is likely to increase as companies continue to digitize their operations and consumers become more reliant on technology in their daily lives.
Even though there may be some hesitation in contract negotiations and new orders due to recent turbulence in the US caused by the US banks, any slowdown is expected to be short-term, lasting only one to two quarters. Additionally, recent challenges have been offset by significant revenue drivers in the last five years, including increased demand for IT due to Covid and the push for machine learning and AI. The IT industry has been a major driver of economic growth over the last decade, and this trend is expected to continue in the future. Investors who are willing to look past the short-term challenges and focus on the long-term potential of the industry may find that the IT sector offers attractive investment opportunities at this time.