Infosys' Weak Guidance Suggests Long-Term Headwinds, BMO Prefers Computer Sciences

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BMO Capital Markets is concerned with Infosys Ltd ADR INFY’s recent FY 2017 revenue guidance cut as it makes difficult for the company to achieve its long-term targets.

Infosys cut its FY 2017 revenue guidance to 8-9 percent year-over-year CC from 10.5-12 percent year-over-year CC on slower spending environment. In addition, the company also cut its FY 2017 margin target to 24-25 percent from 24-26 percent.

“We think meaningfully lower rev growth this year and next year puts INFY’s goal of $20 billion revenues by CY2020 in serious doubt, requiring annual growth of 22% y/y beyond our current projections,” analyst Keith Bachman wrote in a note.

As such, Bachman slashed its FY 2017 EPS estimates to $0.93 from $0.96 as well as FY 2018 EPS estimates to $1.00 from $1.06.

However, the analyst maintained his Market Perform rating on Infosys, but trimmed his price target to $17 from $19.

“We continue to believe that investors should take a more defensive position within IT Services, and prefer Outperform rated Computer Sciences Corporation CSC,” Bachman added.

At time of writing, shares of Infosys were up 0.57 percent to $15.75.

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Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsBMO Capital MarketsKeith Bachman
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