Infosys share price jumped around 2 per cent on Wednesday, a day after Dow Jones announced collaboration with the IT company as the former continues to expand its product portfolio. Infosys touched intraday high of Rs 1,819 per share, and brokerages expect the stock to rally further on account of digital transformation business, strong sustainable margin gain and healthy deal pipeline. So far this year, Infosys share price has declined 4 per cent vs benchmark indices which have corrected over 8 per cent. Brokerage firm Axis Securities has a buy call on the stock this week with an upside potential of 6 per cent.
Why pick Infosys stock?
Digital transformation business: According to Axis Securities analysts, Infosys’ engagement with its partner network has expanded beyond certifications into setup of co-innovation centers, building industry solutions, ISV partnerships and joint sourcing of deals. These partnerships play a significant role in implementation, rollouts & upgrades, validation and support services, per the analyst.
Additionally, the recent deal trend continues to be robust for Infosys and is “reflective of traction in BFSI, Retail & CPG, Manufacturing and BFSI verticals,” the brokerage said. It will continue to invest in COBALT, its digital product), Digital Talent and S&M which is imperative to drive growth. The COVID outbreak is expected to create a huge opportunity across geographies for Infosys to post strong organic growth over different verticals.
Strong sustainable margin gain: In recent times, the Infosys management has taken cost optimization efforts which is expected to help them to gain long term sustainable operating margins. “There are some tailwinds like better service mix, reducing the marketing spend, lowering travel cost, employee restructuring and improving utilization. We believe gaining efficiency over business will help them to get more profitability and higher return ratios,” said Axis Securities in its note.
Healthy deal pipeline: Another positive for Infosys, according to analysts, is the company’s deal pipeline which remained industry leading in Q3 FY22 at $2.53 billion. Despite uncertainty, Infosys won several large transformation deals across verticals like BFSI, Communication, manufacturing, Automobile. “This healthy deal pipeline will help to improve revenue visibility for FY22E and FY23E,” said Axis Securities note.
Infosys stock rating: BUY
Target price: 1,895 (Upside 6%)
The brokerage has a ‘Buy’ call on the stock for a target price of Rs 1,895 implying an upside of 6%. Investors can pick Infosys this week on account of attractive valuations, macroeconomic tailwinds, encouraging growth opportunities, company-specific triggers and sector-specific attributes, noted Axis Securities.