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On Tuesday, Wipro Ltd (NSE:WIPR). (WPRO:IN) (NYSE: WIT) shares faced a downgrade by Jefferies, with the firm's analyst Akshat Agarwal shifting the rating from Hold to Underperform. Accompanying the downgrade, Jefferies also lowered Wipro (NYSE:WIT)'s price target to INR210.00 from the previous INR310.00.
The downgrade was prompted by concerns over limited growth prospects until there is an improvement in the United States economic outlook. Jefferies has also reduced its earnings per share (EPS) estimates for Wipro by 2-14%, citing weakening demand, potential margin pressures, and adverse foreign exchange movements.
Agarwal's analysis suggests that the sector Wipro operates in is unlikely to experience a re-rating unless the U.S. economic growth outlook becomes more positive. In line with this perspective, Jefferies has cut the price targets for its coverage universe by 5-35%.
In addition to Wipro, Jefferies downgraded other companies within the sector. Tata Consultancy Services (NSE:TCS) was downgraded due to limited growth potential, while LTIMindtree (NSE:LTIM) and Mphasis were moved from Buy to Hold because of their high exposure to the U.S. market and discretionary spending.
Despite the negative outlook on these companies, Jefferies continues to favor Infosys (NSE:INFY), Coforge, and Sagility. These firms remain the top picks within the sector according to Jefferies, suggesting a more optimistic view on their potential performance. Infosys, with its market capitalization of $68.5 billion and steady revenue growth of 3.02%, demonstrates strong fundamentals. InvestingPro analysis shows the company maintains a GREAT financial health score, with a moderate P/E ratio of 20.86 and an attractive dividend yield of 2.52%. According to InvestingPro's Fair Value model, Infosys currently appears slightly undervalued.[Get comprehensive sector analysis and discover more investment opportunities with InvestingPro, which offers detailed financial metrics, Fair Value calculations, and expert insights for over 1,400 US stocks.]
In other recent news, Infosys Ltd. reported strong financial results, surpassing market expectations in revenue, margins, and earnings growth. The company achieved a quarter-over-quarter constant currency revenue increase of 1.7%, exceeding the consensus estimate of 1%. Infosys also revised its fiscal year 2025 revenue growth forecast upward, now anticipating a 4.5%-5% year-over-year increase. Despite these robust results, Bernstein analysts slightly reduced their price target for Infosys to INR 2,330.00, while maintaining an Outperform rating.
In contrast, Morgan Stanley (NYSE:MS) downgraded Infosys from Overweight to Equalweight, citing concerns about growth due to weaker deal wins and limited discretionary spending recovery. They adjusted the price target to INR 1,740.00. Meanwhile, Jefferies cut the price target to INR 1,835.00 but upheld a Buy rating, emphasizing a favorable risk-reward balance. CLSA upgraded Infosys to Outperform, maintaining a price target of INR 1,978.00, citing stable demand and strategic positioning in AI and SaaS implementations. Erste Group downgraded Infosys to Hold, indicating that the company's growth rates remain below the global technology sector average.
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