Bullish indicating open at $55-$60, IPO prices at $37
On Monday, Stifel analysts made adjustments to Infosys (NSE:INFY) Technologies’ (NYSE:INFY) financial outlook, reducing the price target from $18.00 to $17.00, while maintaining a Hold rating on the company’s shares. The revision follows Infosys’ announcement of its fiscal fourth-quarter results on Thursday, which revealed revenue figures that fell short of market expectations but earnings per share that met predictions. According to InvestingPro data, Infosys generated $19.28 billion in revenue over the last twelve months, with a healthy gross profit margin of 30.46% and maintains a strong financial health score of 3.25 out of 5.
The company’s large deal bookings remained flat, aligning with recent trends but displaying a year-over-year decline. This was seen against a challenging comparison from the previous year. Infosys’ performance in various industry verticals echoed the patterns seen among other leading IT service providers, with manufacturing (especially automotive), consumer goods, and technology sectors showing weakness, while financial services exhibited more resilience. InvestingPro analysis shows the company maintains excellent operational efficiency with a return on equity of 29% and operates with minimal debt, sporting a debt-to-equity ratio of just 0.06.
For the fiscal year 2026, Infosys set a revenue growth forecast in constant currency terms ranging from 0% to 3%, a figure significantly below the consensus estimate of 8.5%. This new projection is closer to Stifel’s recently revised forecast of 3.5%. The company’s margin guidance, with a midpoint of 21% remaining roughly flat year-over-year, matched Stifel’s predictions but fell short of the broader market consensus. This guidance aligns with recent statements from industry peers such as Accenture (NYSE:ACN), Tata Consultancy Services (NSE:TCS), and Wipro Limited (NYSE:WIT), indicating a consistent outlook across the sector. Based on InvestingPro’s Fair Value analysis, Infosys appears undervalued at current levels, suggesting potential upside despite near-term headwinds.
Despite the lower-than-expected guidance, Infosys stock experienced a modest decline of approximately 2% following the announcement. This suggests that investors had already braced for significant downward revisions. The stock has declined 26.37% year-to-date, now trading at a P/E ratio of 22.52 with a current ratio of 2.27, indicating strong liquidity. Other companies in the same group showed little change in their trading, possibly indicating that the market has already factored in a flat growth and margin outlook for the industry in 2025. For deeper insights into Infosys’s valuation and financial health, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro.
While it remains challenging to predict a turnaround in the current market conditions, Stifel analysts find the market’s reaction to Infosys’ guidance to be a positive sign. They recommend EPAM Systems Inc. (NYSE:EPAM) as a Buy with a price target of $147.16 for investors looking to make long-term decisions in the sector. Infosys maintains strong fundamentals with a revenue CAGR of 9% over the past five years and has consistently paid dividends for 25 consecutive years.
In other recent news, Infosys Ltd. reported a challenging fourth quarter for fiscal year 2025, with a 3.5% quarter-over-quarter revenue decline, which was below expectations. This disappointing performance led to several analyst firms adjusting their outlooks on the company. Goldman Sachs downgraded Infosys from Buy to Neutral, citing concerns over growth visibility and reducing the price target to INR1,530. Meanwhile, Investec (LON:INVP) upgraded the stock from Hold to Buy, despite lowering the price target to INR1,575, highlighting the potential for a growth rebound as market conditions stabilize. BMO Capital Markets maintained a Market Perform rating but cut the price target to $18, following Infosys’ guidance for modest revenue growth. Bernstein SocGen also reduced its price target to INR1,680 but upheld an Outperform rating, suggesting potential long-term fundamentals despite recent setbacks. UBS adjusted the price target to INR1,850, maintaining a Buy rating, and noted the company’s capacity for growth in fiscal year 2026 amid macroeconomic challenges. Infosys management has provided guidance for organic revenue growth of 0-3% year-over-year in constant currency, with expectations of additional growth from recent acquisitions.
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