On Friday, Morgan Stanley (NYSE:MS) maintained its Overweight rating on Infosys (NS:INFY) Ltd. (INFO:IN) (NYSE: INFY) stock and increased its price target to INR2,050.00, up from the previous INR1,650.00. The firm's optimism is based on revised revenue growth forecasts and margin assumptions for the upcoming fiscal years.
The analyst at Morgan Stanley projects a year-over-year revenue growth increase of 5.3% for fiscal year 2025 and 8.7% for fiscal year 2026. These projections have led to a 1.5%-2.5% upward revision in the revenue estimates for fiscal years 2025 to 2027, expressed in USD. Additionally, slight adjustments have been made to the EBIT margin assumptions for the same period, with an increase of 10-30 basis points.
These revised margins and growth expectations have resulted in higher net income estimates, which are now 2%-6% greater than previous calculations. The valuation model used by Morgan Stanley has also been updated, with the valuation now rolled forward by six months to September 2026.
Morgan Stanley has adjusted the probabilities of different scenarios in its analysis, increasing the likelihood of a bull case to 30% from the prior 20%, while decreasing the bear case probability to 10% from 20%. The new price target of INR2,050.00 is based on approximately 27 times the estimated earnings per share (EPS) for September 2026.
The firm suggests that Infosys could potentially outperform Tata Consultancy Services (NS:TCS) in terms of revenue growth during an upcycle, which may lead to a narrowing of the valuation multiple gap between the two companies.
In other recent news, Infosys Ltd. has seen its price target raised by Goldman Sachs (NYSE:GS), CLSA, and Kotak, following strong quarterly revenue growth of 3.6% and an Earnings Before Interest and Taxes (EBIT) margin of 21.1%.
Goldman Sachs adjusted its target to INR1,870.00, citing the company's robust performance in the Banking, Financial Services, and Insurance (BFSI) sector and record large deal wins.
CLSA, which raised its target to INR1,747.00, revised its Earnings Per Share (EPS) estimates upwards for fiscal years 2025-2027.
Kotak increased its price target to INR2,050.00, maintaining a Buy rating on the stock, and highlighted strong total contract value, robust free cash flow, and reduced costs of software packages for service delivery.
Infosys also announced a strategic partnership with Sector Alarm (NASDAQ:ALRM) to modernize the latter's enterprise systems using cloud technology. The company's CEO, Mr. Salil Parekh, reached a settlement with the Securities and Exchange Board of India, though the specifics of the settlement remain undisclosed. These are recent developments.
InvestingPro Insights
Recent data from InvestingPro corroborates Morgan Stanley's optimistic view on Infosys Ltd. (NYSE: INFY). With a strong market capitalization of $89.58 billion and a P/E ratio of 28.23, Infosys stands out as a significant player in the IT Services industry. The company's consistent performance is further highlighted by a solid revenue growth of 1.92% over the last twelve months as of Q4 2024, demonstrating its ability to expand despite market fluctuations.
InvestingPro Tips suggest that Infosys has raised its dividend for 3 consecutive years, indicating a commitment to returning value to shareholders. Additionally, the company's liquid assets exceed short-term obligations, providing a cushion for operational flexibility. With a dividend yield of 2.6%, Infosys offers investors a steady income stream. It's worth noting that there are more valuable insights available; InvestingPro features 18 additional tips for Infosys, which could be crucial for investors making informed decisions.
For those interested in deeper analysis, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro. This could be particularly beneficial for investors considering the recent revisions by analysts and the stock's tendency to trade with low price volatility. With Infosys trading near its 52-week high and a strong return over the last month, the company's stock continues to attract attention in the market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.