Analysts Expect Thoughtworks' Constraints To Abate In Upcoming Quarters

Thoughtworks Holding, Inc TWKS clocked 27.5% revenue growth in Q2 to $332.1 million, beating the consensus of $328.3 million.
Adjusted EPS of $0.11 was in-line with the consensus.
RBC analyst Daniel Perlin reiterated Outperform and cut the price target from $25 to $22.
Q2 results and guidance highlight that TWKS' premium solutions/services continue to be in demand, he noted.
However, client funding constraints (for tech scale-up projects), implementation delays (expected to ramp in Q4 vs. Q3), and COVID-related pressures in China led to a more challenging Q3, with a rebound expected in Q4, as some of these issues decrease.
Citi analyst Ashwin Shirvaikar reiterated a Buy.
Thoughtworks beat 2Q22 but provided a below-consensus 3Q22 outlook, he noted.
Meanwhile, it left its FY22 constant currency growth outlook unchanged.
The lower-than-expected 3Q22 outlook is due to (i) funding constraints at some tech clients, (ii) some client ramps delayed to 4Q, and (iii) lower utilization (particularly in China), he noted.
The full-year outlook assumes most of these events are one-time in nature with a quick return to normal in 4Q22, but this is likely to lead to some investor concerns around visibility and downturn positioning, he added.
He likes Thoughtworks' overall positioning and views the valuation as attractive.
Price Action: TWKS shares traded lower by 5.04% at $14.50 on the last check Tuesday.

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