Wednesday, June 19, 2024

DXC Technology Stock Jumps After Report of Possible Bid from Apollo, Kyndryl

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Key Takeaways

  • DXC shares moved higher ahead of the opening bell on Tuesday following a report that Apollo Global and Kyndryl Holdings are considering making a joint bid for the company.
  • The duo have reportedly discussed a bid price of between $22 and $25 per share, implying a 27% premium to Monday’s $18.45 closing price, assuming a $23.5 midpoint bid price.
  • Monitor the $22 level, an area on the chart where the DXC Technology price many run into overhead resistance from a descending channel’s upper trendline.

DXC Technology (DXC) shares moved higher ahead of Tuesday’s opening bell after gaining more than 11% on Monday following a Reuters report that asset manager Apollo Global (APO) and Kyndryl Holdings, an IT infrastructure services provider, are considering making a joint bid for the company.

A person familiar with the matter said the duo have discussed a bid price of between $22 and $25 per share, implying a 27% premium to Monday’s $18.45 closing price, assuming a $23.5 midpoint bid price.

DXC, which provides a range of IT services such as analytics, cloud infrastructure, and outsourcing, is also seeking bids to divest its insurance software business arm for more than $2 billion and may decide to remain an independent company, the report said. DXC announced in March last year that it had ended discussions regarding a potential takeover, citing the undisclosed buyer’s challenges in raising necessary financing.

Executive Changes, Slower Enterprise Spending

DXC shares have slumped around 30% over the past 12 months as several senior executive changes and slower sales growth have weighed on investor sentiment. The company’s performance has been hurt by enterprise customers reining in their IT spend amid an uncertain macroeconomic outlook and higher interest rates.

Last month, the company unveiled a $250 million restructuring plan to reduce excess capacity in its legacy business aimed at turning its fortunes around. During its fiscal 2024 fourth quarter, the company reported a 5.7% drop in revenue and said it sees revenue declining between 4% and 6% in fiscal 2025.

Monitor This Key Overhead Resistance Level

DXC Technology shares have oscillated within a textbook descending channel since August 2022, with the pattern’s upper and lower boundaries establishing clear support and resistance levels. More recently, the stock found buying interest near the channel’s lower trendline but still trades below both the 50- and 200-day moving averages.

Amid further upside, investors should monitor the $22 level, an area on the chart where the price many run into overhead resistance from the pattern’s upper trendline. However, a volume-backed breakout above this important technical level could mark the start of a new trend higher.

DXC shares were up 2.7% at $18.95 about two hours before Tuesday’s opening bell.

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As of the date this article was written, the author does not own any of the above securities.

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