Infosys a wise investment following its 6% decline today? Let’s analyze whether this dip presents a buying opportunity for potential investors
Infosys: The share price of this IT company, specializing in consulting, outsourcing technology, and next-generation digital services, experienced a 6 percent decline on Friday following the release of quarterly financial results and guidance announcements. Investors may be wondering if now is the opportune moment to consider purchasing shares after this drop.
Share Price Movement
During Friday’s trading session, Infosys Ltd’s share price hit a daily low of Rs. 1,812, marking a 6.03 percent decrease. The share price rebounded slightly to Rs. 1,814.70, still 5.90 percent lower than the previous day’s closing price of Rs. 1,928.45. Over the past year, the stock has shown a return of approximately 10.75 percent, outperforming the Nifty Index.
Q3FY25 Results
The company’s stock declined following the release of its quarterly financial results and an upward revision of the guidance outlook for FY25. In its most recent filing for the quarter ending December 2024, Infosys reported a 7.58 percent increase in revenue, reaching Rs. 41,764 crore compared to Rs. 38,821 crore in Q3 FY24. Quarter-over-quarter, operational revenue rose by 1.89 percent from Rs. 40,986 crore in Q2FY25.
During the same period, net profit increased by 11.59 percent to Rs. 6,822 crore in Q3FY25, compared to Rs. 6,113 crore in Q3FY24, and rose by 4.69 percent from Rs. 6,113 crore in Q2FY25.
In Q3FY25, revenue from Financial Services accounted for approximately 27.74 percent, Retail for 13.75 percent, Communication for 11.22 percent, Energy for 13.49 percent, Manufacturing for 15.51 percent, Hi-Tech for 7.85 percent, Life Sciences contributed 7.65 percent, and the remaining 2.76 percent from others. The new deal bookings in the Q3FY25 stood at $2.1 billion across services and software. The guidance for FY25 was set at 4.5 to 5 percent (constant currency) and EBIT margin guidance at 18 to 19 percent.
Management Commentary
In a recent statement, Infosys CEO and Managing Director Salil Parekh expressed satisfaction with the company’s performance. He highlighted the strong revenue growth seen in a traditionally slow quarter, as well as the consistent year-on-year growth and impressive operating parameters and margins. Parekh emphasized the company’s ongoing efforts to enhance its enterprise AI capabilities, with a particular focus on generative AI, which has been well-received by clients. This strategic focus has resulted in significant large deal wins and an improved deal pipeline, instilling confidence in the company’s future prospects.
Guidance Update & Deal Win
Infosys has revised its guidance for FY25, now projecting revenue growth of 4.5 percent to 5 percent in constant currency terms and an operating margin of 20 percent to 22 percent in Q3FY25. This update follows the previous guidance of 3.75 percent to 4.50 percent in Q2FY25, reflecting the company’s optimism for the current quarter. Additionally, Infosys secured a substantial $2.5 billion Large Total Contract Value deal in Q3FY25, further bolstering its financial outlook.
Brokerage Target
Leading global brokerage firm Jefferies has initiated coverage of Infosys stock, assigning a ‘Buy’ rating with a target price of Rs. 2,250 per share. Jefferies commended Infosys for its strong revenue growth, highlighted by significant deal wins and increased discretionary spending. The firm has raised its earnings estimates by 2 percent and anticipates an 11 percent compound annual growth rate (CAGR) in EPS from FY25 to FY27.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.