Infosys Guidance Scare: Why Some Analysts Still See Share Price Going Higher

Infosys share price is stabilising in Monday’s trading after the major rout seen post-earnings late last week.

The information technology stock traded 0.3% higher ₹1,335.10 at the time of writing. The stock has a 52-week high of ₹1,498.8 and a 52-week low of ₹1,274.2. Over the past week, the stock is down about 7% — most of this slump came Friday as the company’s earnings report and outlook disappointed investors.

Earnings and Outlook: As reported by Benzinga on Friday,  Infosys missed analyst estimates as it reported consolidated net profits for the April-June period at ₹5,945 crore.

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The IT company said it now expects revenue to grow between 1% and 3.5% in the current fiscal year, which is significantly below the 7% growth projects by top analysts.

Top Analyst Ratings Right Now:

• ICICI Securities has downgraded the stock to Hold, with a price target of ₹1,499, which still signifies an upside of 12.2%.
• BOB Capital Markets has maintained its Buy rating on the stock with a price target of ₹1,760, a whopping upside of 31.8%.
• Motilal Oswal maintained the ‘buy’ rating for the stock with a target price of ₹1,600.
• Axis Direct is recommending to sell the stock with a price target of ₹1,300.
• IDBI Capital is recommending to hold the stock with a price target of ₹1,440.
• HDFC Securities recommends “Accumulate” with a price target of ₹1,450.
• KRChoksey has an “Accumulate” rating on the stock with a lowered price target of ₹1,331.60.

Analyst Thesis: Among the bullish thesis, BOB Capital Markets analyst Saptarshee Mukherjee said despite the company’s cautious outlook, he believes its “strength in managing the twin journeys of digital transformation (Cobalt) and cost takeout will drive growth leadership.”

The guidance cut may weigh on the stock price in the short term, but such an event is “more temporary than structural in nature,” according to the analyst.

On the flip side, Axis Securities’ analyst Omkar Tanksale sees major downside to the stock due to the medium-term challenges on demand and uncertain supply-side constraints, which would moderate Infosys’ growth in the current fiscal year.

“Global uncertainties and economic slowdown may impact the automation spend and result in delays in investment decisions in North America from where the company earns its majority of the revenue,” he noted from the short-term perspective.

“These uncertainties will settle down in the next two to three quarters, the demand scenario will gain momentum once again and would be backed by consistent deal wins.”

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