I firmly believe that IT giant- Infosys (INFY) has potential to become a multi bagger stock in long term and tech investors must add this gem of an IT stock in their portfolio. Infosys is an India based global consulting and IT services company which has more than 279K employees globally.

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The IT giant recently posted its Q2 21 results which were above the analyst’s forecasts. It reported a 5.7% quarter-on-quarter growth in consolidated revenues for Q2 21 and a 12% rise in consolidated net profit for the quarter ended September 21 from a year earlier.

 Image Source: Infosys Official Website

Infosys is betting on its global business and pandemic induced demand surge

Infosys has been able to cash in on the sudden demand surge for IT services, as is evident in its latest financial results. The company’s largest geographic segment – North America, is growing at 23.1% and revenue segment – Financial services is growing by 20.5% on a YoY basis at a constant currency rate. Digital services which contributes more that 55% of the company's revenues grew more than 42% YoY and beat market estimates. 

"Our stellar performance and robust growth outlook continue to demonstrate our strategic focus and the strength of our digital offerings. As we witness a strong market opportunity with global enterprises rapidly accelerating their digital journeys, our sustained investments in expanding capabilities, including the differentiated cloud play, Infosys CobaltTM, has uniquely positioned us to continue serving our clients effectively, gain market share and emerge as the preferred cloud and digital transformation partner in the market. Given this continued momentum we have further increased our revenue growth guidance to 16.5%-17.5%”, said Salil Parekh, CEO and MD of Infosys.

Some of the recent noteworthy expansions include the launch of the Automotive Digital Technology and Innovation Center in Stuttgart, Germany which aims to enable and monetize IT infrastructure transformation in the automotive sector. Infosys has also partnered with The Economist group around sustainable growth which will further increase its clean tech credentials. These developments re-instate my faith in Infosys in delivering solid results in the coming few years from now.

Takeaway for investors

Infosys is India’s second largest IT company after Tata Consultancy Services (TCS). However, it has outperformed TCS, who reported lower than expected earnings around the same time. With strong growth in large, medium and small deals and a proven record of executing on exceptional demand growth, I expect Infosys to deliver strong growth performance in the coming years as well.

With solid financial performance and growing global collaboration, Infosys has proved that its strategy of providing next generation digital services and consulting is clearly working in its favor. I expect Infosys to trade above $30 by the second quarter of 2022. Looking at the current price level of $23, one can see that the RSI indicator currently stands at an overbought zone (refer the above chart for more information).

Of late, the stock price has risen more on impulse, and I expect the stock to dip slightly further from current levels. However, it is still an excellent buy option for long term investment horizons of 5-10 years. This is where the stock will give multi bagger returns to its shareholders. Readers should note that the stock has already provided investors returns of 200.78% in the last 5 years.