April turned out to be a great month for stocks, as the Nasdaq Composite rose about 14% and the S&P 500 jumped nearly 10%.
The resurgence was led by tech and AI stocks, many of which recovered from a first-quarter correction -- but not all. There are still some AI stocks that did not recover and are trading at low entry points.
One of them is DXC Technology (DXC 3.28%). DXC Technology stock sank to its lowest level since April 3, 2017, the day it went public.
Is it time to buy this beaten-down AI stock, or should you just avoid it altogether? Let's take a look.
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DXC stock hits an all-time low
DXC Technology used to be Computer Sciences Corp., an IT consulting firm that was founded in 1959. In April 2017, Computer Services Corp. merged with the enterprise services business of Hewlett Packard Enterprise and formed DXC Technology.
DXC traded around $59 per share in 2017 and spiked to $96 per share in 2018. But since then, save for a surge during the 2021 tech boom, it has been a long, slow decline. On April 30, it closed at an all-time low of $11.32 per share -- that is since it went public as DXC in 2017.
On an average annualized basis, DXC stock has dropped 17.7% per year over the past nine years.
Restructuring plan
DXC has not always been an AI stock. In fact, it only recently pivoted toward AI.
DXC is an IT services and consulting firm that helps companies and organizations run their IT systems. It primarily advises companies on their IT needs and manages IT infrastructure for them.
NYSE: DXC
Key Data Points
The problem for DXC is that it wasnʻt able to pivot fast enough from handling IT outsourcing for clients at its own data center facilities to cloud-based consulting. It had these massive, expensive buildings that became huge expenses as its clients turned to the cloud-based subscription models and to providers that donʻt own the buildings.
Two years ago, DXC announced a restructuring plan to lower costs, reduce its infrastructure, and sell off some of its real estate, lower its debt, become more efficient, and improve profitability. The expectation was to put the company on a path of sustainable free cash flow generation by fiscal 2026.
Part of the turnaround plan involved embracing AI technology through the use of agentic AI models and other applications to streamline operations.
Pivot to AI
To further its restructuring and AI initiatives, DXC management rolled out a two-track solution last fall -- a core track and a fast track. The core track will focus on enhancing its legacy business in its key growth areas. One of its biggest clients is SAP, and its plan is to scale up this business and double SAP revenue over the next three years.
The main focus will be on the fast track plan. Fast Track is DXC's pivot to "AI native or highly AI-infused solutions" that it has been building in recent years. The goal is to have fast-track solutions account for 10% of DXC's business within 36 months.
One of its new fast-track initiatives, introduced in January, is AdvisoryX, a service that helps companies ramp up AI models and infrastructure, leading to better productivity and profitability. It is important because many companies are struggling with monetizing AI.
Moving in the right direction
DXC has made some progress. In the latest quarter, its fiscal third quarter, revenue was down 1%, but adjusted earnings rose 4%, and GAAP earnings increased 96% as it executes on its cost-cutting. Also, the company had $266 million in free cash flow, up 5% year to date, with projections for $650 million at the end of the year.
DXC stock is dirt cheap, as one might expect, trading at just 4 times earnings. It has a ways to go in its turnaround, but investors should tune in for its Q4 and year-end earnings on May 7 for more visibility on where it is headed.
It is too early to see if the turnaround plan and pivot to AI are working. In the first quarter, general concerns about overspending on AI certainly didn't help. But DXC should be a stock on your radar. If it can make the transition to an AI future, you could load up on some really cheap shares.
