Infosys share price falls over 2% ahead of Jul-Sep quarter result; all eyes on deal wins

Kulkarni expects key watch out points to be BFSI and retail vertical outlook, commentary on deal environment, and any update on cash return program

Infosys share price fell over 2 per cent to Rs 1,134.20 apiece on BSE ahead of July-September quarter earnings later in the day today. The stock opened at Rs 1,164.70 and hit a day’s low of Rs 1,134.20 so far. In the previous session, Infosys stock hit a fresh 52-week high of Rs 1,165.86, rallying over 128 per cent in less than seven months. Besides, IT giant also informed in a press release that it has been positioned as a Leader in the September 2020 Gartner’s Magic Quadrant for IT Services for Communications Service Providers, Worldwide. “During Q2, the consensus revenue expectations are of 2.6% growth sequentially in constant currency. Consolidated EBIT margin is at 22.9% (+20bp QoQ),” Suyog Kulkarni, Senior Research Analyst at Reliance Securities, told Financial Express Online.

Kulkarni expects key watch out points to be BFSI and retail vertical outlook, commentary on the deal environment, and any update on cash return program. “On consolidated FY23 EPS, Infosys is trading at 15% discount to larger peer TCS which is in line with historical range,” Kulkarni added. So far, two IT companies Tata Consultancy Services (TCS) and Wipro have come up with their quarterly earnings. And both of them announced a share buyback of Rs 16,000 crore and Rs 9,500 crore, respectively. Also, later this week, HCL Technologies is scheduled to announce the second-quarter earnings for the current fiscal.

Analysts at Centrum Broking expect Infosys to deliver on-year USD revenue growth and remain best in the pack. It believes large cost take out deals are needed for Tier 1 IT vendors to pull surprises on revenue growth, for example, Infosys-Vanguard deal. According to the brokerage firm, for 2QFY21, Infosys will deliver 2.5 per cent sequential constant currency growth. It has already shown good margins in 1QFY21 and could continue to maintain margins sequentially with a modest uptick.

Research and brokerage firm Edelweiss Securities has revised up the target price for Infosys to Rs 1,688 from Rs 1,266. It believes that digital and cloud adoption, the two big themes, should be the focus areas for investors. It has recommended Infosys in the large-cap space to capture the above themes.

Earlier this month, Infosys had announced the acquisition of Blue Acorn iCi, a digital commerce agency. Research firm Nomura has a ‘buy’ rating on Infosys with a target price of Rs 1,165 apiece. Nomura in its report noted that Infosys continues to strengthen its positioning in digital and since 2017 has made nine tuck-in acquisitions at a total cost of $600 million and at an average acquisition multiple of 3x trailing sales.

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