Why Infosys Ltd Stock Hit a Record High

Infy stockInfosys Ltd up 145% Since March, But Just Getting Started

Infosys Ltd (NYSE:INFY) has a market cap of $63.5 billion, so it isn’t exactly an under-the-radar tech stock, but it’s not a stock you hear a lot of investors talking about. Which is unfortunate, since it’s been providing some lucky investors huge gains over the last decade.

Most recently though, since 2017, Infosys Ltd stock has advanced 148%. INFY stock is up 48% year-over-year, climbed 60.5% in 2020, and increased 145% since the coronavirus-fuelled sell-off in March.

Infosys Ltd stock has been enjoying strong annual growth on the heels of impressive financial results. And in mid-October, it closed on the acquisition of Kaleidoscope Innovation, a product, design, and development firm that serves the health-care industry.

INFY stock has made strong gains of late, up nearly 20% over the first two weeks of October alone, and it’s ripe for near-term profit taking. That said, it has tremendous long-term growth potential and a 12-month share forecast of $22.50. This implies that additional upside of approximately 36% is not out of the question.

Chart courtesy of StockCharts.com

Infosys Ltd Overview

Infosys Ltd provides consulting, technology, outsourcing, and next-generation digital services. It is also involved in disruptive technologies, including Blockchain, Internet of Things (IoT), Artificial Intelligence (AI), and Data Analytics. (Source: “Investor Presentation Q1 FY21,” Infosys, last accessed October 14, 2020.)

The company’s consulting services include enterprise applications, digital transformation, insights and analytics, and change and learning.

Infofys Ltd’s business services include data analytics, digital and oracle.

Its technology services include application management; cloud, infrastructure, and security; engineering services; enterprise mobility; IoT; and testing.

And Infosys Ltd’s outsourcing services include application outsourcing, business process outsourcing, customer service, finance and accounting, human resources, and sourcing and procurement.

The India-based company serves customers in 46 countries around the world. The majority of Infosys Ltd’srevenue (61.5%) comes from North America, while 24% comes from Europe and and 13.5% from the rest of the world.

The Acquisition of Kaleidoscope Innovation

On October 12, Infosys completed its previously announced acquisition of Kaleidoscope Innovation, a product design, development and insights firm that operates in the medical, consumer, and industrial markets. (Source: “Infosys Completes Acquisition of Product Design and Development Firm, Kaleidoscope Innovation,” Infosys, October 12, 2020.)

Kaleidoscope designs microsurgical instruments, devices used in minimally invasive surgery, drug delivery devices for ophthalmic therapies, and user-centric wearables. It also offers usability testing in support of regulatory submissions.

The Cincinnati, OH-based company serves a marquee, diversified customer base with in-house, state-of-the-art labs, 3D-design environments, and customer experience centers.

Infosys Raises Revenue Guidance as Profits Surge

On October 13, Infosys announced that revenue for the second quarter ended September 30 increased 6.1% year-over-year to $3.1 billion.

Second-quarter digital revenue was up 25.4% at $1.6 billion (47.3% of total sales). (Source: “Growth acceleration accompanied by 3.7% YoY margin expansion; revenue and margin guidance increased to 2%-3% in cc and 23%-24% respectively,” Infosys Ltd, October 13, 2020.)

Second-quarter operating profit surged 20.7% year-over-year and 18.7% sequentially to $840.0 million.

Net income was up 14.7% year-over-year at $653.0 million, or $0.15 per share.

Pravin Rao, Infosys’ CEO, noted, “The resilience at Infosys was fully visible with the company witnessing broad-based growth and its highest ever deal wins,” which he pegged at $3.2 billion.

During the second quarter, the company signed deals with Consolidated Edison, Inc. (NYSE:ED), Cologne, Germany-based Lanxess AG, LivePerson, Inc. (NASDAQ:LPSN), Old National Bancorp (NASDAQ:ONB), and The National Bank of Bahrain.

In spite of the coronavirus pandemic, Infosys was able to report strong revenue and profitability growth. With headwinds from COVID-19 easing, Infosys is raising its guidance for fiscal 2021.

It now expects revenue to grow between two percent and three percent. Much higher than the zero percent to two percent growth it provided earlier in the year.

Analyst Take

Infosys Ltd is a fabulous tech stock that has been providing buy-and-hold investors with exceptional growth over the last decade. By all accounts, this momentum should continue over the coming years.

It has a strong balance sheet, giving it the ability to combat COVID-19-instituted cost-cutting measures, it has been announcing new customer wins, and it’s been expanding its offerings through strategic acquisitions.