Infosys Is On Track For New All-Time Highs

Infosys Proves Tailwinds In Tech Are Still Blowing

One of the biggest stories coming out of the pandemic was the massive shift to technology that was sparked by stay-at-home and work-from-home needs, a shift aided by Infosys. Now, more than a year later, it looks like those tailwinds continue to blow.  Infosys NYSE: INFY, a technology-focused consulting firm, results prove that not only is business still strong but it's still growing as well. Looking at the chart, it looks like the company's share price is still growing too. If price action is able to break out of its current consolidation pattern we see the stock moving up to new all-time highs and gaining another 25% in value by the end of the year.

Infosys Accelerates To Record Levels

Infosys reported a fantastic quarter in which revenue grew by 20.5% over last year. The $3.99in net consolidated revenue is also up 25% versus 2 years ago, a company record, and beat the Marketbeat.com consensus estimate by 250 basis points. The company's revenue gains are driven by its own shift to digitization with digital revenues up 42.4% over last year and accounting for 56.1% of the total. This compares to the company's core business which saw its revenue shrink by 1%. On a segment basis, seven of the eight operating saw gains with many growing by double-digits, the only segment to post negative revenue growth was the Other category.

Moving down the report, the company experienced some margin contraction to the tune of 180 basis points which was slightly more than expected. The operating margin came in at 23.6%, however, and earnings were still solid. The GAAP earnings of $0.17 were in line with the consensus estimate. In regards to cash flow and free cash flow, however, the company's free cash flow improved by 5.6% to $712. 

Turning to the guidance, the guidance is favorable despite the pressure on margins. The company has upped its target for revenue growth for fiscal 2022 to a range of 16.5% to 17.5% and for margins to run in the range of 22% to 24%. This compares to the current consensus estimate for revenue growth in the range of 17%.

Infosys Has The 411 On Safe Dividends

Infosys pays about 1.65% in yield with shares trading near $22.75. This comes to about 52% of the consensus earnings estimate for the year and is backed up by a fortress balance sheet. Free cash flow is more than ample to cover the payment and continue raising it as it has been raised over the past decade. Dividend payments are a little erratic on a quarter-to-quarter basis but have only increased on an annual basis since the dividend payout began.

The Technical Outlook: Infosys Price Pullback Is Over

Price action in Infosys has been moving lower over the past few weeks but that downtrend appears to be over. Price action popped more than 3.5% in the wake of the strong Q2 results and full-year outlook and appear ready to resume the uptrend. The weekly chart is particularly telling showing a strong uptrend and quick consolidation that has the stock ready to begin moving sideways if not moving higher. In our view, Infosys may trend within a range for the near-term but new all-time highs are expected in the mid to long-term. A move above the $24 level would be bullish and could easily carry the stock up by 50% or more before hitting major resistance.