Analyst UBS has downgraded Infosys to Sell from Buy, and slashed its price target to $45.77 from $67.44. The firm is worried the IT outsourcing giant isn't as well-positioned as rivals to take advantage of growth opportunities, and is also concerned about its high attrition rate, both of management and staff.
Infosys has seen a number of senior execs jump ship since Narayana Murthy returned as chairman last year, and CEO S.D. Shibulal plans to leave by January. Meanwhile, concerns about the impact of cloud software/services on traditional outsourcing work remain high; Infosys has tried to deal with the trend in part by offering more proprietary/value-added services.
On purely financial rather than technology terms, TheStreet Ratings Team likes the company: "We rate Infosys a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 16.4%. Since the same quarter one year prior, revenues slightly increased by 7.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the IT Services industry average, but is less than that of the S&P 500. The net income increased by 9.7% when compared to the same quarter one year prior, going from $444.00 million to $487.00 million.