Infosys: Invest Now Or Miss Out?

Infosys is a well-known Indian IT services company that has been delivering steady profits over the years. The company's share price has experienced some volatility, but the overall trend has been upward-moving. Infosys has a strong performance history, and its shares are considered a good investment option, especially for the long term.

However, there are some risk factors to consider, such as market fluctuations, interest rate changes, competition from rival companies, and negative news impacting share prices.

Analyst recommendations vary, with some suggesting it is a good time to buy Infosys shares, while others recommend holding or selling. It is important for investors to conduct their own due diligence and assess their risk tolerance, investment goals, and portfolio composition before making any investment decisions.

Infosys' share price history

Infosys share price history

On 12 July 2024, Infosys closed at ₹1712, up 3.57% from the previous day's close of ₹1653.05. The stock opened at ₹1655 and reached a high of ₹1719 and a low of ₹1642.25. The market capitalization of Infosys was ₹684491.47 crore. The 52-week high for the stock was ₹1721.29 and the 52-week low was ₹1304.24. The BSE volume for Infosys was 178,432 shares traded.

On 10 July 2024, Infosys closed at ₹1647.7, down 0.58% from the previous day's close of ₹1657.25. The stock opened at ₹1659 and reached a high of ₹1666 and a low of ₹1650.4. The market capitalization was ₹686230.6 crore. The 52-week high was ₹1721.29 and the 52-week low was ₹1304.24. The BSE volume for the day was 172,981 shares.

On 11 November 2023, Infosys' historical price data showed that the stock was trading at $1,571.95, down 0.41% from the previous close.

On 5 May 2023, Infosys announced a cash dividend of 8.00 with an ex-date of 31 May 2024.

As of 10 July 2024, Infosys' share price was ₹1647.7, with a 52-week high of ₹1721.29 and a 52-week low of ₹1304.24. The share price was 4.99% away from its 52-week high.

The company's performance

Infosys has had a strong performance history, with its share price graph showing a mostly upward trajectory over the past decade. The company has consistently generated substantial profits in the share market, and its stable performance has solidified its position as one of the prominent names in the market.

In 2020, the Infosys stock rebounded from a low of INR585 at the start of the COVID-19 pandemic in mid-March to close the year at nearly INR1,300, recording returns of over 71%. This was likely due to the increased demand for software and IT services as a result of the rapid digitalisation during the pandemic.

The positive momentum continued into 2021, with the stock gaining 50.3% and closing the year at INR1,887.75. On January 17, 2022, the stock touched its yearly peak at INR1,953.50 after the company reported strong quarterly earnings.

However, the stock has faced some challenges since then. As of September 27, 2022, the stock was trading at INR1,398, having dropped more than 26% year-to-date and 21% in one year. This decline can be attributed to deteriorating economic conditions in the US and the looming global economic slowdown.

Despite these setbacks, Infosys has demonstrated strong financial performance. For the fiscal year ending March 31, 2023, the company's revenue from operations increased by 16% year-over-year to INR37,441 crore. However, the company's profit after tax (PAT) decreased by nearly 16% quarter-over-quarter to INR6,128 crore.

In the first quarter of the 2023 fiscal year, Infosys booked revenue of $4.44 billion, a 17.5% growth year-over-year. The digital segment remained the primary driver of revenue, accounting for 61%. The company's net profit for this period was $689 million, a slight decrease from the previous year.

Infosys has a strong presence in the market, offering a range of services such as digital marketing, digital commerce, applied artificial intelligence (AI), blockchain, data analytics, cybersecurity, and more. The company has 13 subsidiaries and provides services in more than 50 countries.

Analysts have varying opinions on the future performance of Infosys stock. Some have lowered their price targets, while others have maintained a 'buy' rating. It is important to note that investing in the stock market carries risks, and individuals should conduct their own research before making any investment decisions.

Interest rates

Infosys, the Indian IT services company, has been impacted by the US Federal Reserve's interest rate hikes to tackle soaring inflation. The Fed's aggressive monetary policy has put Indian IT stocks under pressure since March 2022, when the first rate hike was imposed.

The US market is crucial for Infosys, as North America accounted for 61.8% of its revenue in the first quarter of FY 2023 ending 30 June 2022. With the Fed's subsequent rate hikes, concerns about a potential recession in the US have heightened worries about the earnings of Indian IT companies.

In this context, Infosys' stock price has been volatile. It reached a peak in January 2022, but has since dropped, falling more than 26% year-to-date as of 27 September 2022. However, analysts have different views on the stock, with price targets ranging from INR1,506 to INR1,760.

While interest rates are a key factor influencing Infosys' performance, other factors are also at play, including the company's financial results, the broader economic outlook, and the impact of the pandemic and digitalisation trends.

Risk factors

Investing in Infosys shares carries several risk factors that potential investors should be aware of:

• Market Risk: Fluctuations in the market can impact return rates, and investors may face losses. The inflow of cash into markets can cause a certain chance of failure in returns. There is no guarantee that the share price or interest rates will remain the same in the future.
• Competition: Rival companies that provide similar services could offer better returns, causing Infosys to lose shareholders.
• News and Rumours: Negative news or rumours can impact the share price and returns.
• Loss and Buyer Ability: If Infosys experiences losses, both the company and its shareholders will be affected. The risk of losing buyer ability is a significant concern for investors.
• Recession: Infosys has been impacted by the global economic slowdown and fears of a recession in the US, the leading export market for Indian software products.
• Interest Rates: Aggressive interest rate hikes by central banks to combat inflation can affect the company's performance and earnings.
• Geographic Exposure: A large portion of Infosys's revenue comes from North America and Europe, so economic downturns or crises in these regions can affect the company's performance.
• CFDs: CFDs (complex instruments) come with a high risk of losing money rapidly due to leverage. Most retail investor accounts lose money when trading CFDs.

Analyst views

Analysts at Jefferies and Motilal Oswal have recommended Infosys as a 'buy'. However, ICICI Securities retained its rating as a 'hold' for the stock in July 2022. In April 2023, ICICI Securities lowered its target price by 7% to Rs 1,641, but maintained a 'buy' rating. The same month, Reliance Securities downgraded Infosys to 'sell' from 'buy', with a revised target price of Rs 1,350.

In July 2022, Jefferies stated that Infosys was its top pick, citing the company's growth leadership and strong execution. In a note published in June 2022, Jefferies analysts Akshat Agarwal and Ankur Pant wrote that Infosys was on track to deliver an 11-15% compound annual growth rate in revenue and earnings per share from 2023 to 2025. They also noted that outsourcing and offshoring could be boosted by high unemployment and a weak economic environment in the US, which would drive market share gains for Indian IT companies like Infosys.

Motilal Oswal, a Mumbai-based financial services firm, said in July 2022 that they expected Infosys to deliver strong growth and reduced dependence on subcontractors as attrition falls. The company also highlighted the opportunity in the digital segment, anticipating Infosys to be a key beneficiary of an acceleration in IT spending.

In April 2023, ICICI Securities noted that Infosys has high exposure to the digital transformation agenda of clients, which is experiencing delays in decision-making, leading to a sharp revenue drawdown in Q4FY23. They forecast a 6.4% constant currency revenue growth in FY24, closer to the higher end of the guidance. For FY25 and FY26, ICICI Securities maintained its double-digit revenue growth forecast, as structural demand drivers for the industry remain intact. However, they lowered their EBIT margin assumption due to concerns about Infosys' ability to recoup margins in mega deals.

In contrast, Reliance Securities took a more cautious view in April 2023, downgrading Infosys to 'sell' due to concerns about the global slowdown and delayed decision-making in the US. They anticipated a challenging FY24, with the slowdown and adverse macroeconomic conditions impacting revenue and earnings growth, potentially leading to a valuation de-rating to pre-Covid levels.

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