Will Vishal Sikka's Strategy Take Infosys Stock To Rs 4,000?
Aug 19, 2014, 13:28 IST
MUMBAI: IT major Infosys has remained firm after reporting a 3.5 per cent cut in Q1 net profit. The change of guard at Infosys, with Vishal Sikka taking over as the CEO, has been positively accepted by both the Infosys employees and investor community
Since taking over, Sikka has taken five key steps, early signs of which seem to suggest that there has been a change in the mood from near-despondency to excitement.
Sikka’s 5-point strategy includes winning confidence of seniors, promoting engineers, connecting with employees, meeting clients and meeting venture capitalists.
“Infosys was going through a period of internal struggle and turmoil and it came to grips with a generational change in leadership,” said Dipen Sheth, Head-Institutional Research, HDFC Securities, to ET Now.
“By and large the ship has been steadied now. It is a fantastic business. It has got lots of cash on the balance sheet. It has got probably the best or close to the best name that one can think of in terms of brand salience in Indian IT,” he added.
According to him, the inflexion point in Infosys happened when the sentiment was at its worst near Rs 3,000.
“If you will allow me the luxury of hindsight, I do not think there is much that can go wrong unless they shoot themselves in the foot from here on. I do not see how you can lose money in Infosys,” Sheth added.
Morgan Stanley is of the view that Infosys can surprise the street positively on margins.
“Going by historical patterns, we think the India business will revert to profitability from 2Q15 and could boost Infosys’ overall margins. Overall, we believe Infosys could continue to surprise the Street positively on operating margins, and earnings estimates could further move up over the coming quarters,” the report said.
The brokerage will now be looking for factors such as pickup in revenue growth in 2Q, strong deal wins, sustenance of FY guidance and strategy possibly from the new CEO in the second quarter results.
Meanwhile, Jefferies has downgraded the stock to hold from buy. It has cut the price target to Rs 3,520 from Rs 3,675 earlier. According to the brokerage, incremental improvements are a challenge for the company. The margin gains now depend on revenue growth, which is still lacking. For the new management, opportunities are not without challenges, it says.
The stock of Infosys has gained over 8 per cent since its Q1FY15 quarter results reported last month.
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Since taking over, Sikka has taken five key steps, early signs of which seem to suggest that there has been a change in the mood from near-despondency to excitement.
Sikka’s 5-point strategy includes winning confidence of seniors, promoting engineers, connecting with employees, meeting clients and meeting venture capitalists.
“Infosys was going through a period of internal struggle and turmoil and it came to grips with a generational change in leadership,” said Dipen Sheth, Head-Institutional Research, HDFC Securities, to ET Now.
“By and large the ship has been steadied now. It is a fantastic business. It has got lots of cash on the balance sheet. It has got probably the best or close to the best name that one can think of in terms of brand salience in Indian IT,” he added.
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“If you will allow me the luxury of hindsight, I do not think there is much that can go wrong unless they shoot themselves in the foot from here on. I do not see how you can lose money in Infosys,” Sheth added.
Morgan Stanley is of the view that Infosys can surprise the street positively on margins.
“Going by historical patterns, we think the India business will revert to profitability from 2Q15 and could boost Infosys’ overall margins. Overall, we believe Infosys could continue to surprise the Street positively on operating margins, and earnings estimates could further move up over the coming quarters,” the report said.
The brokerage will now be looking for factors such as pickup in revenue growth in 2Q, strong deal wins, sustenance of FY guidance and strategy possibly from the new CEO in the second quarter results.
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Morgan Stanley has a target of Rs 4,000 on the stock.Meanwhile, Jefferies has downgraded the stock to hold from buy. It has cut the price target to Rs 3,520 from Rs 3,675 earlier. According to the brokerage, incremental improvements are a challenge for the company. The margin gains now depend on revenue growth, which is still lacking. For the new management, opportunities are not without challenges, it says.
The stock of Infosys has gained over 8 per cent since its Q1FY15 quarter results reported last month.