On Friday, HSBC maintained a Hold rating on Infosys (NS:INFY) Ltd. (INFO:IN) (NYSE: INFY), while reducing the price target to INR1,680 from INR1,760.
The adjustment follows a revision of the company's earnings per share (EPS) estimates, which were lowered by 3-4% due to anticipated top-line reductions of 2-3%.
The firm's analysis suggests that Infosys is currently trading at a price-to-earnings (PE) ratio of approximately 22 times its forecasted FY25 earnings per share. This valuation represents a roughly 20% discount compared to its competitor Tata Consultancy Services (NS:TCS), which HSBC believes is reasonable given Infosys' slower growth rate and lower profit margins.
HSBC's commentary indicates that while Infosys' business outlook has been underperforming relative to TCS, this trend may be nearing its lowest point. However, the firm does not foresee any immediate significant positive changes that could serve as an inflection point for the stock's performance.
The new price target of INR1,680 reflects the firm's revised expectations for Infosys' financial performance. Despite the reduction in the target price, HSBC's stance on Infosys remains unchanged, suggesting a neutral outlook on the stock's potential movement in the market.
InvestingPro Insights
As investors consider HSBC's hold rating on Infosys Ltd. (NYSE: INFY), InvestingPro data provides additional context to the company's financial health and market performance. Infosys boasts a solid market capitalization of $69.94B, underlining its significant presence in the IT services industry. The company's P/E ratio stands at 22.35, which aligns closely with the valuation discussed in HSBC's report, and the stock's price-to-book ratio as of the last twelve months ending Q4 2024 is at 6.59, indicating a higher valuation compared to its book value.
From a dividend perspective, an InvestingPro Tip highlights that Infosys has not only maintained its dividend payments for 25 consecutive years but has also raised its dividend for 3 consecutive years, showcasing a commitment to returning value to shareholders. This consistency in dividend payments could be a reassuring signal for investors looking for stable income streams, especially when considering the current dividend yield of 2.21%.
Moreover, Infosys' low price volatility, as noted in an InvestingPro Tip, may appeal to investors who prefer less turbulent stock movements. This characteristic, coupled with the company's ability to cover interest payments with its cash flows, suggests a degree of financial stability that could be a deciding factor for risk-averse investors.
For those looking to delve deeper into Infosys' prospects, additional InvestingPro Tips are available, including insights on earnings revisions and the stock's relative performance. There are 15 more InvestingPro Tips listed for Infosys at https://www.investing.com/pro/INFY, which can be accessed with an exclusive offer. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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