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Infosys has Room to Grow Despite Visa Scare: Here's Why
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The unexpected victory of Donald Trump in the 58th quadrennial presidential election had sent the Indian IT industry into panic mode, with frontrunners dreading Trump’s stance on anti-immigration policies. Expectedly, Indian IT behemoth Infosys Limited’s (INFY - Free Report) heavy dependence on the H-1B visa program made it particularly vulnerable to any sudden policy change.
However, despite the high octane political drama surrounding the visa program, Infosys’ shares have appreciated a strong 6.1% in the past three months, better than the Zacks categorized IT Services industry’s average return of 4.5%. The impressive beat in Infosys’ third-quarter fiscal 2017 results (released in January) reinstated investors’ confidence in the stock.
Here are a few reasons why we still believe the stock has ample growth potential.
The Growth Drivers
Infosys has been diligently following the “Renew New” program to boost growth. Two of its strategies—Zero Distance Program and improving next-generation services with AiKiDo (Artificial Intelligence, Knowledge-based IT and Design thinking) offerings—have proved major growth drivers in recent times. Overall, the Renew New strategy has helped the company reap multiple benefits, including renewal of traditional services, successful introduction of new ones and winning of deals.
During the fiscal third quarter, the company added 77 clients with two being in the above-75 million revenue brackets. Solid performance across all its platforms — Finacle, Edge Verve, and Panay — proved conducive to growth. This apart, Infosys’ collaboration with leading technology providers like Microsoft Corporation (MSFT - Free Report) and Amazon.com, Inc. (AMZN - Free Report) is expected to offer a competitive edge over peers.
H-1B Visa Worries Exaggerated
The Trump administration has drafted an executive order to make changes in the H-1B program but none of them have materialized so far. According to Stephen Miller, an advisor of Donald Trump, immigration will remain a “merit-based system”, where deserving candidates can gain entry. It is safe to say that a complete repeal of the program will cause more harm to the U.S. economy and is unlikely to occur.
Meanwhile, leading banks, the key customers of companies like Infosys and Wipro Limited (WIT - Free Report) , are likely to boost their spendings if Trump delivers on his promise to slash corporate taxes and loosen other regulations. This bodes well for Infosys and its peers. To make the most of the situation, Infosys has decided to stop junior employees from applying for H-1B visas. The lengthy legislative process that accompanies such major changes will give Infosys ample time to adjust to the changes, if and when they happen.
Impressive Fundamentals
Infosys has missed earnings only once in the trailing four quarters. During the last reported quarter, the company’s earnings per American Depository Share came in at 24 cents, beating the Zacks Consensus Estimate by a penny and up 4.3% on a year-over-year basis. The bottom line benefited from a modest top-line performance and diligent operational execution. Also, the company holds a Zacks Rank #2 (Buy), which implies that it is expected to outperform the broader market in the next few months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In addition, Infosys also has a Zacks VGM score of ‘A’. Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics. A good VGM score indicates stronger chances of success. Our research shows that stocks with Style Scores of ‘A’ or ‘B,’ when combined with Zacks Rank #1 or 2, offer the best upside potential.
More Stock News: This Is Bigger than the iPhone!
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Infosys has Room to Grow Despite Visa Scare: Here's Why
The unexpected victory of Donald Trump in the 58th quadrennial presidential election had sent the Indian IT industry into panic mode, with frontrunners dreading Trump’s stance on anti-immigration policies. Expectedly, Indian IT behemoth Infosys Limited’s (INFY - Free Report) heavy dependence on the H-1B visa program made it particularly vulnerable to any sudden policy change.
However, despite the high octane political drama surrounding the visa program, Infosys’ shares have appreciated a strong 6.1% in the past three months, better than the Zacks categorized IT Services industry’s average return of 4.5%. The impressive beat in Infosys’ third-quarter fiscal 2017 results (released in January) reinstated investors’ confidence in the stock.
Here are a few reasons why we still believe the stock has ample growth potential.
The Growth Drivers
Infosys has been diligently following the “Renew New” program to boost growth. Two of its strategies—Zero Distance Program and improving next-generation services with AiKiDo (Artificial Intelligence, Knowledge-based IT and Design thinking) offerings—have proved major growth drivers in recent times. Overall, the Renew New strategy has helped the company reap multiple benefits, including renewal of traditional services, successful introduction of new ones and winning of deals.
During the fiscal third quarter, the company added 77 clients with two being in the above-75 million revenue brackets. Solid performance across all its platforms — Finacle, Edge Verve, and Panay — proved conducive to growth. This apart, Infosys’ collaboration with leading technology providers like Microsoft Corporation (MSFT - Free Report) and Amazon.com, Inc. (AMZN - Free Report) is expected to offer a competitive edge over peers.
H-1B Visa Worries Exaggerated
The Trump administration has drafted an executive order to make changes in the H-1B program but none of them have materialized so far. According to Stephen Miller, an advisor of Donald Trump, immigration will remain a “merit-based system”, where deserving candidates can gain entry. It is safe to say that a complete repeal of the program will cause more harm to the U.S. economy and is unlikely to occur.
Meanwhile, leading banks, the key customers of companies like Infosys and Wipro Limited (WIT - Free Report) , are likely to boost their spendings if Trump delivers on his promise to slash corporate taxes and loosen other regulations. This bodes well for Infosys and its peers. To make the most of the situation, Infosys has decided to stop junior employees from applying for H-1B visas. The lengthy legislative process that accompanies such major changes will give Infosys ample time to adjust to the changes, if and when they happen.
Impressive Fundamentals
Infosys has missed earnings only once in the trailing four quarters. During the last reported quarter, the company’s earnings per American Depository Share came in at 24 cents, beating the Zacks Consensus Estimate by a penny and up 4.3% on a year-over-year basis. The bottom line benefited from a modest top-line performance and diligent operational execution. Also, the company holds a Zacks Rank #2 (Buy), which implies that it is expected to outperform the broader market in the next few months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In addition, Infosys also has a Zacks VGM score of ‘A’. Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics. A good VGM score indicates stronger chances of success. Our research shows that stocks with Style Scores of ‘A’ or ‘B,’ when combined with Zacks Rank #1 or 2, offer the best upside potential.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>