Near-term headwinds may halt Coforge’s sizzling rally
Subscribe to enjoy similar stories. Coforge Ltd stock has delivered mouth-watering returns to its investors in a matter of months. On Monday, the tier-2 IT services stock hit a new 52-week high of ₹9,354.
With that, the stock price has more than doubled from its 52-week low of ₹4,287 in May 2024. The Street is finding comfort from a combination of favourable factors. For instance, Coforge management recently told analysts at Nirmal Bang Institutional Equities that deal closures in the December quarter (Q3FY25) remained better than expected at the start of the quarter.
The December quarter is seasonally weak for the IT sector owing to furloughs, which usually lead to fewer deal wins/conversions and thus weaker sequential revenue growth. The Nirmal Bang report dated 12 December further highlighted that there was strong show of confidence from chief financial officer Saurabh Goel’s commentary on achieving $2 billion revenue by FY27. Coforge's current revenue run-rate is around $1.5 billion.
After all, Coforge performance in the September quarter (Q2FY25) was impressive as it managed to deliver sequential organic constant-currency revenue growth of 5.5%, beating analysts’ expectations. Revenue growth was broad-based across verticals and geographies. Also read: Ghost of microfinance comes back to haunt IndusInd Bank It should be noted that there have been lingering concerns surrounding the pace of Coforge’s organic growth and revenue synergy from the Cigniti acquisition.
Against this backdrop, the Q2FY25 result boosted investor sentiment. Further, fresh order intake in Q2FY25 stood at $516 million (including $67 million from Cigniti), making it the 10th consecutive quarter of more than $300 million order intake. The
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