UPDATE 1-Goldman Sachs raises ExlService to buy; shares rise

(Changes source; adds details, share movement)

June 20 (Reuters) - Goldman Sachs raised ExlService Holdings (EXLS.O) to "buy", saying the outsourcing firm's long-term growth prospects and positive exposure to the offshore business process outsourcing end-market remained intact.

Shares of the company were up 7 percent at $16.32, after earlier hitting $17.33 on the Nasdaq.

ExlService shares' recent weakness, on concerns that the company could lose a contract with Aviva, has already priced into the shares and presented an attractive entry point for investors, analyst Julio Quinteros wrote in a note to clients.

"As such, we view recent weakness as overdone and expect valuation of the shares to recover to more normalized levels once the magnitude of potential earnings impact (from the contract loss) is better understood ...," Quinteros said.

However, Quinteros cut his six-month price target on the stock to $20 from $22 and reduced his 2009 and 2010 earnings estimates on the company, to reflect a worse-case scenario if ExlService loses the Aviva contract.

ExlService shares, which had lost 34 percent of their value this year, touched their life-time low of $14.36 on Monday. (Reporting by Bijoy Koyitty in Bangalore; Editing by Bernard Orr)