Infosys emerges top Nifty gainer as BofA sees 18% further upside

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

The global brokerage also raised the target price to Rs 1,785 from Rs 1,735, citing attractive valuations, implying over 18 percent upside from current levels.

The Infosys stock has declined 2 percent 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.

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Analysts at BofA base their positive call on Infosys’ anticipated demand recovery by 2025. “The normalisation of post-Covid spike in IT spends can be done with by mid-CY24. This transformation IT spends can see an uptick post US elections. We see upcoming earnings to provide last cut or floor to CY24E,” they added.

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.

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“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 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 percent constant currency (CC) revenue growth for FY25, below the Street’s expectations of 7 percent.

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