Infosys stock gains 5% hits new 52-week high after Q1 beat; Jefferies suggests buy for 16% potential upside

Shares of the Bengaluru-based IT services major gained as much as 5 per cent in early trade on Friday’s trade (July 19) after the company reported better-than-expected Q1 earnings on the previous day. The stock at day's high scaled to Rs 1843, its fresh 52-week high, while at the last count it traded with gains of 3.6 per cent at Rs 1,823.05.

The consolidated net profit at the country’s second largest IT firm for the April-June quarter came in at Rs 6,368 crore, down 20.1 per cent sequentially, nonetheless, it marked a 7.1 per cent uptick on-year. The research desk anticipated a 20.9 per cent fall in net profit sequentially to Rs 6,300 crore as against Rs 7,969 crore reported in the previous quarter. 

In rupee terms, revenue at the company during the reporting quarter came in at Rs 39,315 crore, a 3.6 per cent growth year-on-year (YoY), while Zee Business research desk anticipated the figure at Rs 38,900 crore. In the previous March-ended quarter, the company's consolidated revenue was recorded at Rs 37,923 crore.

Revenue at the digital services and consulting firm registered a 3.6 per cent uptick sequentially to $4,714 million, while it rose 2.5 per cent on-year in constant currency terms.

Zee Business research desk projected revenue in constant currency terms to grow by 2.3 per cent sequentially.

Operating margin at the company during the review period came in at 21.1 per cent, up 1 per cent quarter-on-quarter.

Also, on a positive note the company has raised the guidance to 3%-4% revenue growth in constant currency terms, while the operating margin is pegged at 20-22 per cent for FY25. The desk estimated the company to maintain 1-3 per cent CC earnings growth and 20-22 per cent EBIT margin guidance for FY25.

Ahead of the announcement of the results, the company’s stock ended higher by nearly 2 per cent at Rs 1,759.15 per share after hitting fresh 52-week high earlier in the trade.  

Here’s what global brokerages recommend on the stock after Infosys Q1 results

Global brokerage Jefferies while maintaining buy on the stock has raised the target from Rs 1,630 to Rs 2,040, suggesting a nearly 16 per cent potential upside. The brokerage said the company’s Q1 beat estimates, driven by strong revenue growth of 3.6 per cent QoQ. Further, it mentioned that though the company has raised its FY25 growth guidance, it seems conservative in the context of strong deal wins. 
Furthermore, the brokerage underlined that the initial signs of recovery in the BFSI segment and strong deal wins suggest that the worst is behind. Jefferies expects the company to deliver 10 per cent EPS CAGR over FY24-27.

Bernstein maintained Outperform call on the stock with a raised target price of Rs 2,100, implying potential upside of 19 per cent from the last close. The brokerage highlighted that the IT major delivered its strongest beat In ten quarters In Q1 across revenue, margin & EPS. Also, deal momentum remains strong at $4.1 billion TCV. Bernstein sees beginning of an upcycle trend as growth recovers, BFSI inflects & AI deals scale up.