Infosys Gains 2% As BofA Sees 18% Further Upside; See Target Price

Infosys emerged as the top Nifty gainer on April 9 morning, with the stock surging more than 2 per cent to Rs 1,509 after the BofA upgraded the IT services player to “buy” from “neutral”.

The new revised target implies nearly 21 per cent probable gains from the stock.

The upgrade has been effected in the counter making an early case for CY25 demand recovery. Further, the institution maintains that normalization of the post covid spike in IT spends could be done with mid CY24. Also, compliance of the Basel requirements is expected to drive up regulatory tech spends by banks.

Additionally, BofA is of the view that amidst the 2027 support, SAP upgrade deadline is becoming more of a priority for enterprises. Also, transformational IT spends could see an uptick post-US elections Upcoming earnings to provide last cut/floor to CY24E, the brokerage said. Also, it stated that valuation affords the case for our upgrade.

The Infosys stock has declined 2 per cent this year, so far, underperforming the Nifty IT index, which, too, has been marginally negative during the period. The stock hit a 52-week high of Rs 1,731 on February 6.

Infosys will release its March quarter results on April 18. Analysts predict a soft quarter, primarily due to higher wage costs and in the absence of large deals.

“We expect Infosys to report flat revenue growth on a sequential basis in Q4FY24, with 20 basis points (bps) cross-currency tailwinds. The limited contribution from mega deals in Q4 is likely to weigh on Q4 financials as well. Margins are expected to contract by 10 bps to 20.4 percent in Q4 due to higher visa costs and wage hikes,” JM Financial analysts said in a preview report.

One basis point is one-hundredth of a percentage point.

The brokerage firm expects the Bengaluru-base IT giant to guide for 3-6 per cent constant currency (CC) revenue growth for FY25, below the Street’s expectations of 7 per cent.