Infosys (NYSE: INFY) has been putting in a lot of effort on a digital transformation that's positioned the firm perfectly for the pandemic and post-pandemic eras. The transformation of Infosys, a consulting and outsourcing company, is focused on digital and includes "re-skilling" its talent pool, investing in new talent, investing in technology, and becoming a future business-services organization rather than a relic of the past. There's no doubting that these efforts are paying off, and they're being helped along by tailwinds that don't appear to be abating. Assuming the market follows through on its post-earnings release action, we expect Infosys stock to not only breakout to a new high but also continue to trend higher for the long term.
A Strong Quarter For Infosys
Any way you look at it, Infosys Stock had a successful quarter. For a growth of 20.9 percent over last year, the firm brought in $4.25 billion in net revenue, according to its earnings report, and last year's income increased by 8 percent. This makes the 4th quarter of accelerating growth and there there is growth predicted for the coming quarter and all 2022. Internally, revenue growth was aided by the digital channels, which increased by 42 percent to 58.5 percent of net sales. So, yes, the transformation plan is working.
Continuing in the report, the company experienced some margin narrowing as a result of rising costs and investment in personnel, but not as much as was expected. The margin fell 190 basis points to 23.5%, and the bottom line was excellent. The GAAP $0.18 has increased a penny from 2021, or about 5.9%, and the consensus was beat by a penny as well.
Looking ahead, the guidance is positive and expecting a strong performance to continue into the current quarter, at least. The firm recorded $2.53 billion in new agreements during the period, which should help it grow YOY by 19.5% to 20%, compared to the previous 16.5% to 17.5% predicted at the end of last quarter. The rise of the Omicron variant is likely only going to boost the company’s performance, so there is an upside risk to the new guidance.
The Sell-Side Is Giving Mixed Signals
Some interest in Infosys stock exists on the sell side, but the indicators are mixed. On the one hand, there is a negative net institutional buying but the price target keeps rising. The consensus price target has increased by more than 100% in the last year and 20% in the past 30 days, despite negative net institutional buying of $0.27 billion over the same period. With shares trading at all-time highs, however, that's only 2.5% of the market capitalization, and it hasn't yet enough to stop gains. Institutions most likely own a relatively small 15.75 percent of the firm and aren't a major driving force in this market right now.
In the wake of the guidance upgrade, Infosys stock gaped more than 1% and opened just below current all-time highs. The price is finding resistance, but it has already closed the gap and confirmed support at the previous close and above the short-term moving average. The indicators anticipating an upward movement in the stock based on the indicators, and we're confident that a new all-time high will be set. Assuming the market is able to move and close above $1915, Infosys stock is anticipated to move up to $2,000 and $2,100 in the next two to three months.