Infosys shares hit 52-week high as Q1 beats estimates; surge 20% in a month

Shares of Infosys rallied nearly 5% in opening trade on Friday after the IT major posted better than expected earnings in the first quarter ended June 30, 2024. In the overnight trade, American depository receipts (ADRs) surged over 8% on the New York Stock Exchange (NYSE), registering its biggest single-day gain in four years as investors cheered its Q1 results.

Early today, Infosys shares opened higher for the third straight session at ₹1,842.05, up 4.7% against the previous closing price of ₹1,759.15 on the BSE. In three sessions, the IT heavyweight has surged as much as 8%. Driven by sustained rally, the counter touched its 52-week high of ₹1,843 in early trade, rebounding 40% against its 52-week low of ₹1,311.60 touched on July 21, 2023.

At the time of reporting, shares of Infosys were trading at ₹1,803.60, up 2.5%, with a market capitalisation of ₹7.48 lakh crore. The shares of country’s second largest IT company witnessed strong volume as 4.56 lakh shares changed hands over the counter in the first hour of trade so far compared to two-week average of 3.45 lakh stocks.

In the last one year, Infosys shares have delivered 23% returns to its shareholders, while it gained over 9% in six months. In the calendar year 2024, the counter has risen 17%, whereas it jumped over 20% in a month.

Infosys released its June quarter results post-market hours on Thursday, posting 7.1% year-on-year rise in its net profit and 3.6% growth in revenue annually. Operating margin was recorded at 21.1% for the quarter, a growth of 0.3% YoY and 1% QoQ. 

During the quarter under review, Infosys signed the highest number of large deal wins at 34, having a total contract value of $4.1 billion. We won 34 large deals with a total contract value of $4.1 billion, with 57.6% of the deals being net new," says Infosys CEO Salil Parekh at an earnings conference last evening.

For FY25, Infosys has given a revenue growth guidance of 3%-4% in constant currency, with an operating margin of 20%-22%.

Analysts view of Infosys Q1

JM Financial has recommended a ‘Buy’ call on Infosys with a revised target price of ₹2,010, saying that the company’s revenue guidance is “conservative”. “Our revised revenue growth estimates are now 5%/8%/11% in constant currency terms for FY25/FY26/FY27 respectively. Higher cross-currency headwind (90 bps) however restricts our FY25E USD revenue growth to 4.1%. We have marginally reduced our FY25E margin estimate to factor in earlier than expected in-tech consolidation,” it says in a note.

Motilal Oswal has also reiterated ‘Buy’ rating with a price target of ₹2,000, expecting Infosys to be a key beneficiary of the acceleration in IT spending in the medium term. “Infosys’ FY25 revenue growth guidance upgrade was largely driven by a one-time India business spike and inorganic impact, but strong deal wins should improve its medium-term growth outlook. It has maintained its margin guidance, but continues to see upside potential in the medium term, which we see as encouraging.”

Another domestic brokerage Nuvama has given a ‘Buy’ call on the stock with an increased price target of ₹2,050, citing that the management sounded upbeat, anticipating a recovery in US-BFS and a stronger H1 than H2. “We reckon Infosys will benefit disproportionately in FY25/26—from revival in discretionary spends—just like it suffered disproportionately (versus peers) in FY24. We view it as one of the best ways to play the IT sector over the next few years,” it says in its report. 

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