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Infosys Ltd ADR INFY

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Digital Demand Defines Infosys’ Q1 Amid Labor Shortage Headwinds; Increasing FVE to $11.90

Julie Bhusal Sharma Equity Analyst

Analyst Note

| Julie Bhusal Sharma |

Infosys’ first quarter was sound, as the company surpassed our top-line assumptions from further digital transformation demand while coming in just slightly over our EPS assumptions. While maintained its full-year expectations for operating margins, it boosted its forecast for revenue growth by 200 basis points. The update has boosted our confidence, leading us to increase our fair value estimate for narrow-moat Infosys to $11.90 from $11.20 per share. Shares are up 2% after results to nearly $21.50, leaving the stock in 1-star territory. As a reminder, we view other Indian IT services names Tata Consultancy and Wipro as significantly overvalued as well. IT services stocks have skyrocketed, with Infosys’ stock having doubled in the last year alone. The pandemic has brought significant tailwinds to the industry, such as accelerated digital transformation demand, but that has also come with headwinds, such as scarce labor. Not to mention, we believe a significant portion of the IT services market growing includes managed infrastructure from new workloads enabled by the cloud, which we think will favor cloud service providers like Amazon and Microsoft.

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Company Profile

Business Description

Infosys is a leading global IT services provider, with nearly 250,000 employees. Based in Bangalore, the Indian IT services firm leverages its offshore outsourcing model to derive 60% of its revenue from North America. The company offers traditional IT services offerings: consulting, managed services and cloud infrastructure services, and business process outsourcing as a service (BPaaS).

Hosur Road, Electronics City
Bengaluru, KA, 560 100, India
T +91 8028520261
Sector Technology
Industry Information Technology Services
Most Recent Earnings Jun 30, 2021
Fiscal Year End Mar 31, 2022
Stock Type
Employees 259,619


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