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On Sunday, Investec (LON:INVP) analysts adjusted their stance on Infosys (NSE:INFY) Ltd. (INFO:IN) (NYSE:INFY), upgrading the stock from Hold to Buy, albeit with a slightly reduced price target of INR1,575.00, down from INR1,590.00. The revision follows a quarter that fell short of expectations, with Infosys reporting a 4.2% quarter-over-quarter revenue decline in USD terms and a 3.5% drop in constant currency, against an estimated 0.5% decline. Earnings before interest and taxes (EBIT) margin also contracted by approximately 40 basis points quarter-over-quarter, where a flat margin had been anticipated.
Despite these setbacks, Investec highlighted that Infosys still offers a free cash flow (FCF) yield of 4.5%, even after a reduction in earnings per share (EPS) forecasts for the fiscal years 2026 and 2027 by 5.4% and 3.5%, respectively. The firm noted that prior to the recent market uncertainties triggered by tariff concerns, all IT Services companies, including Infosys, were experiencing an improving discretionary spending environment, indicating a growing willingness to invest.
Investec anticipates a growth rebound for Infosys as market conditions stabilize, especially considering the past three years have seen subdued spending. The analysts also pointed to the accumulating technology debt in enterprises, which could prompt increased investment in anticipation of widespread artificial intelligence (AI) adoption. With these factors in mind, Investec has decided to roll over valuations to the first quarter of fiscal year 2028 on a trailing twelve months (TTM) basis, which contributed to their decision to upgrade Infosys’ stock rating to Buy.
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