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On Tuesday, Stifel analysts, led by David M. Grossman, adjusted the price target for Infosys (NSE:INFY) Technologies (NYSE:INFY) shares to $18.00, down from the previous $22.00, while retaining a Hold rating on the stock. This revision comes ahead of the company’s fourth-quarter fiscal year 2025 report, set to be released before the market opens on Thursday. According to InvestingPro data, the stock is currently trading at $16.98, with analysis suggesting it may be undervalued. The company maintains strong financial health with an overall score of 3.1 (GREAT), despite a significant 25.39% price decline over the past six months.
Stifel’s reassessment of Infosys’ financial outlook for the fiscal year 2026 (ending March) was influenced by recent commentary from industry peer Tata Consultancy Services (NSE:TCS) concerning current demand trends, along with other market data points. Despite acknowledging the challenges in making forecasts under the current market conditions, Stifel has revised its revenue growth projection for Infosys from an initial 7.0% in constant currency to 3.5%, with expectations for margins to remain relatively flat as opposed to the previously anticipated 30 basis points year-over-year improvement. This forecast comes as the company’s last twelve months revenue growth stands at 3.02%, with a solid gross profit margin of 29.65%.
The revised estimates by Stifel suggest earnings per share (EPS) for fiscal years 2026 and 2027 at $0.80 and $0.86, respectively. These figures are a slight decrease from the earlier forecasts of $0.82 and $0.88 and fall below the consensus in the United States, which stands at $0.82 and $0.90 for the respective years. InvestingPro analysis reveals that Infosys currently trades at a P/E ratio of 20.77, with 4 analysts recently revising their earnings upward for the upcoming period. Discover 13 additional exclusive ProTips and comprehensive financial metrics with an InvestingPro subscription. Stifel’s analysis indicates that approximately 40-50% of Infosys’ revenue comes from verticals considered higher-risk. The firm anticipates sequential revenue declines in the first quarter of fiscal year 2026 (ending in June), followed by modest quarter-over-quarter growth in the second quarter (ending in September), with expectations for improved momentum in the second half of the fiscal year.
The report also touches on the difficulty in predicting both market sentiment and the stock’s response to the potential revisions. It notes that the anticipated 2.5% reduction in EPS is relatively minor. At the time of the report, Infosys’ stock was trading at a discount of 8% and 4% to TCS and Accenture (NYSE:ACN), respectively, which is narrower than the historical average discounts of 12% and 6%. The company maintains a strong financial position with moderate debt levels and has consistently paid dividends for 25 consecutive years, demonstrating resilient operational performance despite market volatility.
In other recent news, Wipro Ltd (NSE:WIPR). has experienced a downgrade from Jefferies, moving from a Hold to an Underperform rating. The downgrade was accompanied by a reduction in the price target to INR210.00 from INR310.00, driven by concerns over limited growth prospects and weakening demand. Meanwhile, Infosys Ltd. has seen a mix of analyst opinions. Jefferies has maintained a Buy rating for Infosys, albeit with a lowered price target of INR1,835.00, citing potential growth challenges due to the US macroeconomic environment. In contrast, Morgan Stanley (NYSE:MS) downgraded Infosys from Overweight to Equalweight, reducing the price target to INR1,740.00, reflecting a cautious outlook on the company’s growth potential in fiscal year 2026.
However, CLSA upgraded Infosys to Outperform, maintaining a price target of INR1,978.00, based on a stable demand outlook and strong cyclical tailwinds. Erste Group, on the other hand, downgraded Infosys from Buy to Hold, observing that the company’s growth rates remain below the average for the global technology sector. These recent developments highlight the varied perspectives among analysts regarding Infosys’ future performance. Investors are advised to consider these insights as they assess the financial health and growth potential of both Wipro (NYSE:WIT) and Infosys in the current market environment.
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