On Friday, BofA Securities maintained its Buy rating on Infosys (NS:INFY) Ltd. (INFO:IN) (NYSE: INFY) stock, with a steady price target of INR2,150.00. The firm's analysis highlighted varied investor interpretations of Infosys' third-quarter earnings report, focusing on whether to consider sequential revenue growth with or without third-party items.
BofA Securities suggests that due to the distinct seasonality of third-party items compared to Infosys' historical trends, it is more appropriate to evaluate revenue growth on a year-over-year (YoY) basis. According to InvestingPro data, Infosys maintains a strong financial health score of 3.34 (GREAT), with current revenue standing at $18.84 billion for the last twelve months.
According to BofA Securities, Infosys' Q3 revenue showed an acceleration to 6.1% YoY compared to 3.3% in the previous quarter. When adjusted for third-party items, the growth rate stands at a solid 4.6% YoY. The firm also pointed out that if Infosys achieves the top end of its revised FY25 revenue guidance, Q4 revenue growth could accelerate to approximately 8% YoY, or over 7% when adjusted for third-party items.
This projection supports the expectation of further growth acceleration in FY26, despite an implied sequential decline in Q4. InvestingPro analysis indicates the stock is trading at a P/E ratio of 26.93, suggesting premium valuation relative to its near-term earnings growth potential.
The report also highlighted that Infosys' third-quarter EBIT (earnings before interest and taxes) grew a robust 12% YoY. This growth rate indicates a low influence of third-party items on operating profits, as these items contribute minimally to the company's overall profits. BofA Securities concluded that the underlying growth acceleration for Infosys is evident, supporting their optimistic stance on the stock's future performance.
For deeper insights into Infosys's valuation and growth metrics, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US equities with detailed analysis and actionable intelligence.
In other recent news, Infosys has been the subject of considerable analyst attention. Morgan Stanley (NYSE:MS) maintained an Overweight rating on the company's stock, highlighting signs of broad-based recovery and strong free cash flow generation. In addition, the firm predicted revenue growth and potential performance surprises. Jefferies echoed this positive sentiment by increasing Infosys' stock price target to INR2,250 and raising its earnings estimates by 2-3%.
ICICI Securities upgraded Infosys stock from Add to Buy, reflecting a positive outlook on the company's potential to capitalize on increased discretionary spending. Axis Capital (NYSE:AXS) Limited also revised its stance on Infosys, elevating the stock from a 'Reduce' rating to an 'Add' status.
Infosys' financial results revealed robust margins at 21.3%, achieving double-digit EBIT growth despite facing margin headwinds. The company also reported an uptick in net new large deal wins in the third quarter compared to the second, indicating a strengthening in their large deal pipeline.
Furthermore, Infosys has expanded its partnership with Meta Platforms (NASDAQ:META), Inc. for AI innovation. These recent developments provide investors with a snapshot of Infosys' performance and strategic moves.
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