Stocks

Infosys tumbles 4% on business outlook; but analysts stay bullish

Venkatesh Ganesh Bengaluru | Updated on January 22, 2018 Published on November 18, 2015

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The Infosys stock fell almost 4 per cent on Wednesday on the back of low EBIT margins outlook, but analysts have retained confidence in the company and believe that it is a good time to buy the stock.

Brokerage house Prabhudas Lilladher has put a target of ₹1,440, over a 12-month horizon, which is an upside in excess of 30 per cent compared to the existing price. On Wednesday, the Infosys stock closed at ₹1,019, or 3.89 per cent down, which is a two-month low.

Brokerage house Angel Broking too, has put a similar target. “We have a buy rating on the stock,” said Sarabjit Kour Nangra, IT Analyst at Angel Broking. On October 14, this year, post-second quarter results, Angel Broking had a put buy call on the stock with a target price of ₹1,306 on the back of a stellar quarter.

Similarly, Prabhudas Lilladher analyst Govind Agarwal said that on the back of the success of various initiatives and continued investments, company is confident of returning to industry growth by FY17 as indicated by the management in the last couple of days.

“We remain positive on the company and retain Infosys as our top pick,” he said.

EBIT margins of India’s second-largest software exporter continues to be under pressure and the management recently indicated that margins in the second half of this fiscal are likely to be lower than in the first half. Currently, Infosys’ margins stand at 25 per cent. It has stated that margins will be in the 24-26 per cent range in the remaining part of the fiscal.

Outsourcing concerns

According to some analysts, the stock fell following some profit booking and broader concerns around the outsourcing sector vis-à-vis the recent Bill introduced in the US that seeks to impose restrictions on companies relying on a large number of H1-B visas.

Even this has not dampened analysts’ optimism on the stock. “Apart from the fact that the company looks to be on track to beat its revenue guidance growth (10-12 per cent in constant currency), it is well positioned to leverage investments made in sales and marketing and its ‘zero bench’ initiative,” said Agarwal.

Published on November 18, 2015
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