Baird: Buy The Dip On Syntel

In a report published Thursday, Baird analyst David J. Koning said that

was the only "IT/BPO stock we cover" that had underperformed the S&P year-to-date. The analyst upgraded the rating on the company to Outperform, while maintaining the price target at $54. Koning noted that the other six stocks under coverage had all outperformed by about 15-50 percent. While Q1 trends had been weak, Q2 appeared strong, with Syntel generating 9 percent sequential growth, the strongest since the second quarter of 2010. Moreover, the company would be facing easier comps in each of the next three quarters, so "growth is set to further accelerate (current guidance implies yoy revenue could hit the mid-teens by Q4)," the Baird report mentioned. "2015E EPS likely moves higher if recent rupee weakness holds." Koning believes that sentiment was "ready to improve" in view of the accelerating trends and "inexpensive valuation." He added that Syntel's stock was currently trading near its three-year low relative to the S&P and the risk/reward appeared "attractive."