Brokerages have pared their expectations from Infosys Ltd. after the management told analysts on Friday that it was seeing weakness in its existing client base and that its guidance was under risk due to uncertainties.
Post the analyst meet, Kotak Securities, Morgan Stanley and Credit Suisse cut their price targets on the stock, even as they maintained their ratings. Here's what brokerages had to say in their notes to clients.
Kotak Securities
- Maintains ‘buy' rating.
- Reduces price target to Rs 1,212 per share from Rs 1,232.
- Expects Infosys to marginally moderate guidance for current fiscal, despite tailwinds in the domestic business.
- The deal pipeline is healthy and the win rates continue to be sustained.
- Stock price has largely factored in the potential guidance cut.
Morgan Stanley
- Maintains ‘overweight/in-line' rating.
- Cuts price target to Rs 1,150 per share from Rs 1,231.
- Expects guidance to be revisited.
- Stock is pricing in lower guidance after recent correction.
- Price to earnings multiple reasonable and downside potential limited.
- Expects the ramp-down of the RBS contract and increased uncertainty to weigh on growth and margins in second half of current fiscal.
- Earnings per share estimates for financial year 2016-17 to 2018-19 reduced by 2.9 to 3.6 percent.
Credit Suisse
- Maintains ‘neutral' rating.
- Cuts price target to Rs 1,175 per share from Rs 1,225.
- Expects near-term uncertainties to keep the stock range-bound.
- With over 13 percent discount to Tata Consultancy Services Ltd., there's not much room for downside from current levels.
- Cuts revenue estimates, leading to a 2 percent reduction in earnings estimates.
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