On Tuesday, Morgan Stanley (NYSE:MS) analysts issued a downgrade for Infosys (NSE:INFY) Ltd. (INFO:IN) (NYSE: INFY) stock, shifting from an Overweight to an Equalweight rating. Accompanying this change, the price target for the company’s shares was also reduced to INR1,740.00 from the previous INR2,150.00. The stock, currently trading at a P/E ratio of 23.9x, has shown mixed performance with a -11.3% return year-to-date, according to InvestingPro data.
The revision by Morgan Stanley comes as a response to concerns regarding the growth outlook for Infosys in the fiscal year 2026. According to the analysts, the company’s growth may be compromised due to weaker deal wins in fiscal year 2025 compared to the previous year. Recent data from InvestingPro shows modest revenue growth of 3.02% over the last twelve months, with six analysts revising their earnings estimates upward for the upcoming period. Additionally, there is an absence of a broad-based recovery in discretionary spending, which could impact the company’s performance.
Morgan Stanley’s analysis also highlighted that Infosys had outperformed its competitor Tata Consultancy Services (NSE:TCS) over the last three months. However, despite this recent success, Infosys’ valuation multiples remain at a premium compared to TCS. The analysts project that both companies are likely to see similar growth in earnings before interest and taxes (EBIT). InvestingPro analysis reveals that Infosys maintains strong financial health with a "GREAT" overall score, supported by robust profitability metrics and a moderate debt level.
The report further elaborates on the potential risks faced by Infosys in the current volatile macroeconomic environment. The analysts believe that discretionary spending could be delayed, posing a greater risk for Infosys compared to its peers. This is particularly concerning given the high expectations already set for the stock.
Investors are advised to note the new price target of INR1,740.00 for Infosys, as it reflects a more cautious outlook from Morgan Stanley based on the factors discussed. The firm’s decision to downgrade the stock to Equalweight is a significant adjustment from their previous Overweight rating, indicating a change in their confidence in the stock’s near-term growth potential.
In other recent news, Infosys Ltd. reported strong financial results, surpassing expectations in revenue, margins, and earnings growth. The company achieved a 1.7% quarter-over-quarter constant currency revenue increase, exceeding the consensus estimate of 1%. Infosys also revised its FY25 revenue growth forecast upward, expecting a 4.5%-5% year-over-year increase, supported by a healthy deal momentum with a total contract value of $2.5 billion. UBS analyst Shaleen Kumar reaffirmed a Buy rating, noting a 60% quarter-over-quarter surge in net new deals, which supports the company’s positive outlook.
BofA Securities maintained its Buy rating, highlighting a 12% year-over-year EBIT growth and projecting further growth acceleration in FY26. Bernstein also kept an Outperform rating, despite slightly reducing the price target from INR 2,350.00 to INR 2,330.00, underscoring Infosys as a top pick in the IT services sector. Meanwhile, Erste Group downgraded Infosys from Buy to Hold, citing growth concerns as the company’s sales and profit growth momentum remains below the global technology sector average.
CLSA upgraded Infosys to Outperform, maintaining a price target of INR 1,978.00, due to a stable demand outlook and strong cyclical tailwinds. The firm highlighted Infosys’ capabilities in SaaS implementations and integration within the Nvidia (NASDAQ:NVDA) ecosystem as positive factors. These recent developments reflect varied analyst perspectives, with some firms expressing confidence in Infosys’ future performance and others adopting a more cautious stance.
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