On Friday, TD Cowen revised its outlook on Infosys Technologies (NYSE:NS:INFY) shares, reducing the price target to $16.00 from the previous $17.00, while keeping a Hold rating on the stock.
The adjustment follows Infosys' initial FY25 guidance, which projected a currency constant (CC) growth of 1-3%, falling short of market expectations. This conservative forecast is attributed to continued caution among the company's clients.
The firm acknowledged Infosys' robust large deal Total Contract Value (TCV), but also noted a persistent discrepancy between bookings and revenue. This gap is partly due to ongoing weakness in discretionary spending, which continues to negatively impact the company's financial performance. Additionally, a major contract re-scoping within the Banking, Financial Services, and Insurance (BFSI) sector is expected to impact FY25 estimates by approximately 70-80 basis points.
Despite recent valuation declines, Infosys' stock price is still hovering near its five-year average. This observation comes amidst a backdrop of what the analyst describes as "lingering sluggishness," questions specific to the company (idiosyncratic questions), and reduced visibility into future performance. The new price target of $16 reflects these concerns as well as the broader challenges faced by the company.
InvestingPro Insights
In light of TD Cowen's revised outlook on Infosys Technologies (NYSE:INFY), it's beneficial to consider additional financial metrics and expert analysis. According to InvestingPro data, Infosys has a market capitalization of $69.94 billion and trades with a P/E ratio of 22.15, which is consistent with the company's historical earnings multiple. Despite recent market turbulence, Infosys has managed to maintain a dividend yield of 2.21%, with a notable dividend growth of 7.71% over the last twelve months as of Q1 2023. This demonstrates the company's commitment to shareholder returns, having raised its dividend for three consecutive years and maintained payments for 25 consecutive years, as highlighted in InvestingPro Tips.
Moreover, Infosys exhibits a low price volatility, which may appeal to investors looking for stability in their portfolio. The company's liquid assets surpass short-term obligations, suggesting a strong liquidity position. However, analysts have tempered their earnings expectations for the upcoming period, with three analysts revising their earnings downwards. For those interested in a more comprehensive analysis, InvestingPro offers additional insights, such as the fact that Infosys is trading at a high P/E ratio relative to near-term earnings growth, and operates with a moderate level of debt. Investors can access these and other InvestingPro Tips by visiting: https://www.investing.com/pro/INFY. Additionally, users can take advantage of an exclusive offer using coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes a total of 15 InvestingPro Tips related to Infosys.
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