Infosys shares took centre stage on D-Street on Friday after the country’s second-largest IT company released its quarterly performance for the October-December period on January 11. The result was mostly in line with analysts’ estimates. Shares of IT major on Friday rallied up to 7.13 per cent to the day’s high at Rs 1,600.75 on BSE as it reported decent results after back-to-back disappointments in recent quarters.
Investors are betting that Q3 was the bottom for the earnings downgrade cycle for Infosys and the sector as the US macro becomes favourable in CY 2024.
Today’s rally in Infosys shares was the biggest single-day gain in the counter since July 16, 2020.
The company tightened its FY24 revenue growth guidance to 1.5 per cent to 2 per cent in constant currency terms. This is in comparison to the 1 per cent to 2.5 per cent guidance it had projected during the September quarter. The company’s shares listed in the US surged 4 per cent overnight.
For its December quarter results, Infosys has scaled down the upper end of the guided revenue by 50 basis points to 2 per cent and raised the lower end of the growth guidance to 1.5 per cent from 1 per cent earlier. The Bengaluru-based IT major, however, maintained its operating margin guidance at 20-22 per cent for FY24.
This is also the third straight revision in guidance that Infosys has made, starting the financial year 2024 with a 4 per cent to 7 per cent growth estimate. “FY24 guidance is tightened but outlook is similar,” said Infosys MD and CEO Salil Parekh.
Deal wins during the quarter stood at $3.2 billion. 71 per cent of those deals were net new, including one large deal in the last quarter, the company said. The quarter also saw termination of the MoU with the global client which had a revenue potential of $1.5 billion.
Infosys Shares Post Q3 Show: Should you Buy?
Brokerage firm Jefferies has maintained its buy rating on Infosys with a price target of Rs 1,740. The brokerage said that the continued headcount decline suggests that growth pick-up is unlikely in the near-term. It has raised its estimates by up to 2 per cent to factor the beat.
Jefferies noted that the company’s strong deal wins provide comfort on its expectation of 13 per cent EPS CAGR over FY24 to FY26.
The December quarter was less about results but the set up for FY25, said Bernstein in its note.
The US broking firm sees growth acceleration in FY25 (easing comps) as macro recovers. It also expects the third quarter to be close to bottom. The brokerage has an “Outperform” call on the Infosys stock, with a target of Rs 1,740 per share.
According to Nomura, the December quarter showed good execution and net new deal wins. There were no signs of discretionary demand revival, the brokerage said. Nomura is neutral on Infosys with a price target of Rs 1,500.
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