Information technology bellwether Infosys Ltd. could be the best strategy to play the revival in the Indian technology space following the guidance upgrade and positive first-quarter earnings.
Nuvama expects Infosys to benefit disproportionately from a revival in discretionary spending in the financial year ending March 2026. "We view it as one of the best ways to play the revival in the IT sector over the next few years," Nuvama said in a July 18 report.
Citi continues to favour the tech major in the Indian IT space, but the sharp 25% upmove in the past 45 days may limit near-term upsides. The overall demand environment and discretionary spending remain challenged while uncertainty continues in the retail segment, the brokerage said in a note.
The Bengaluru-based software services provider now expects revenue to increase by 3-5% in the current fiscal, up from its previous expectation of a 1-2% rise.
Infosys' net profit declined by 20.1% sequentially to Rs 6,374 crore for the three months ended June 30, according to an exchange filing. However, this exceeded the Rs 6,253 crore profit expected by analysts tracked by Bloomberg.
Nomura Research raised its fiscal 2025–2026 earnings estimates by 2–3% to account for higher revenues and margins reported in the quarter. "We believe the improving growth outlook should drive the higher target multiple." The brokerage believes the earnings per share downgrade cycle is likely to end for the sector, with Infosys being their top 'buy-rated' stock in the large-cap IT services space.
The American Depository Receipts of Infosys Ltd. ended over 8% higher on Thursday after it upped its revenue forecast.
Goldman Sachs On Infosys
Maintained a 'buy' with a price target of Rs 1,870 per share against Rs 1,680 apiece earlier.
The highest ever deal wins recorded should continue to aid revenue growth.
Sees upside risks to the guidance, given continued strong deal wins.
Forecasts 5.6% YoY revenue growth for FY25 compared to management guidance of 3-4% revenue.
Raised revenue/EPS estimates for Infosys by up to 1%/2%, respectively.
Nuvama On Infosys
Maintains a ‘buy’ rating on the stock and raises target price to Rs 2,050 apiece from earlier Rs 1,720 apiece, implying a potential upside of 16.2% from the previous close.
Management sounded upbeat, anticipating a recovery in US banking and financial sector.
The guidance includes a 0.7% contribution from in-tech acquisition.
Utilisation increased to 83.9%, likely to be a key lever for margin expansion going forward.
Discretionary spending remains largely on hold.
Infosys will benefit disproportionately in fiscal 2025 and 2026, from a revival in discretionary spending.
JPMorgan On Infosys
Maintained 'overweight' position with a target price of Rs 1,950 per share from Rs 1,750 apiece earlier.
Best play on recovery in short cycle spending.
Margins beat headlines but appear under pressure.
While ramp-ups have stared, they appear to be still diluted by some discretionary contract leakage outside of US FS.
Growth momentum should keep lifting into FY26.
Has the highest upside bus in a cyclical recovery.
Jefferies On Infosys
Maintained 'buy' with a target price of Rs 2,040 per share from Rs 1,630 apiece earlier, an upside of 18% from the previous close.
Initial signs of recovery seen in BFSI space.
Discretionary remains under pressure.
Strong deal wins and operating performance indicate worst is behind.
Raised estimates by 3-4%.
Expects Infosys to deliver 10% earnings CAGR over FY24-27.
CLSA On Infosys
Maintained 'hold' with a target price of Rs 1,747 per share from the earlier Rs 1,607 apiece. This implies a downside of 1% from the previous close.
Sharp revival seen in banking, financial services and insurance segment.
Strong deal wins and Intech acquisition led to lifting of guidance.
Increase earnings by 5% due to higher margin assumptions.
Early signs of margin improvement under the new chief financial officer.
Citi On Infosys
Maintains a ‘neutral’ rating on the stock and a target price of Rs 1,850 apiece, implying a potential upside of 4.9% from the previous close.
Earnings were above the brokerage's expectations.
Guidance has been revised partly because of the acquisition.
Expect better growth, strong total contract value momentum, improved free cash flow trends.
Infosys remains the preferred pick in IT sector.
Near-term upsides may be capped given the sharp 25% move in 45 days.
Reiterate our ongoing pair trade 'overweight' on Infosys and 'underweight' on Tata Consultancy Services Ltd.
Morgan Stanley On Infosys
Maintained 'overweight' with a revised target price of Rs 2,050 per share from Rs 1,650 apiece.
Revenue was broad-based across verticals and geographies.
Commentary indicated initial signs of a pickup in spending in US BFS.
Expects it to deliver the midpoint of margin guidance, with an upward bias.
Multiple could narrow gap with TCS if revenue growth outperforms further.
Infosys' stock rose as much as 4.89% to Rs 1,844 apiece, an over two-year high, in early trade. The previous high of Rs 1,953.9 per share was recorded on Jan. 17, 2022. They later pared gains to trade 3.21% higher at Rs 1,814.5 apiece, compared to a 0.26% decline in the benchmark Nifty 50 as of 9:56 a.m.
RECOMMENDED FOR YOU
Brokerage Views: JPMorgan On LIC, Citi On NMDC, Aurobindo Pharma And More
Nov 12, 2024
Tata Motors Share Price Hits Over 10–Month Low As Analysts Cut Target Price After Weak Q2
Nov 11, 2024
Brokerage Views: Jefferies On Nykaa, Morgan Stanley On Auto Sales And More
Nov 04, 2024
Brokerage Views: Axis Bank, Wipro, Infosys Get Rating Calls Post Earnings; Manappuram Faces Downgrades
Oct 18, 2024
POPULAR