Infosys stock falls 4% after mixed Q2 show: Should you buy, sell or hold it?

Infosys shares in Friday's trade fell over 4 per cent to day low price of Rs 1,889 per share after the company released its Q2 results with steady margins sequentially. Ahead of the results, the company's shares ended nearly 3 per cent higher at Rs 1,969.5 per share on the BSE.

Bengaluru-headquartered IT services major Infosys released its September quarter results on Thursday. For the review period, the company's revenue in constant currency (CC) terms grew by 3.3 per cent YoY and
3.1 per cent QoQ. Zee Business Research estimated revenue to clinch a growth of 3 per cent.

The operating margin at the software services firm has been steady sequentially (QoQ).

Net profit at the company for the September quarter grew to Rs 6,506 crore, logging a 2.2 per cent growth sequentially and 4.7 per cent on-year. Zee Business research estimates consolidated PAT at the company to notch higher by 5.5 per cent sequentially to Rs 6,720 crore.

How do brokerages and analysts view Infosys stock after its Q2 results?

Morgan Stanley maintained its overweight rating on the stock with a target of Rs 2,150 per share. The target implies an upside of over 9 per cent. With a slight miss in 2Q revenue & weak deal wins, the brokerage sees a slight stock correction as possible in the near term. The brokerage advises the stock to build positions on any potential correction.

The brokerage sees support at a 5-year average FCF multiple which is 24 times i.e. at Rs 1,780 per share.

Citi, however, continued with its neutral call on the stock with a target of Rs 1,965. As per the brokerage, the company posted decent Q2 with cc revenue growth at 3.1 per cent sequentially. 

Also, the upper end of the revenue guidance has been raised which comes to be better than peers.

Forward looking indicators for the stock as given out by Citi are:

a) Large deal TCV – down 7.4% TTM yoy
b) Headcount -3% yoy
c) Guidance implies no growth in 3Q/4Q at mid-point

Meanwhile, Anil Singhvi- Zee Business Managing Editor held that Infosys released almost in-line results. Results are ok not great, he added, with growth primarily led by acquisitions. He added that second half of the year is expected to be weak. Further, on Infosys futures, he advised investors not to buy and short the stock at higher levels. As per Singhvi, the support levels for the stock are placed at Rs 1,930 and Rs 1,905, and the stock will show bullish action only above Rs 1,980. 

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