Indian multinational corporation, Infosys, saw its shares plummet over 10% on the Bombay Stock Exchange (BSE) on Friday, April 17th, 2023. The sudden drop follows the release of Infosys’ fourth-quarter and full-year results, which showed that the company missed revenue estimates and provided weak guidance for the upcoming fiscal year.
Infosys reported a consolidated revenue of Rs 30,025 crore for the fourth quarter, which is an increase of 9.8% compared to the same period last year. However, the revenue figure fell short of analysts’ expectations, who had predicted a revenue of Rs 30,500 crore. The company’s net profit for the quarter stood at Rs 6,153 crore, which represents a year-on-year increase of 10.3%.
For the full fiscal year, Infosys reported a consolidated revenue of Rs 1,16,623 crore, which is an increase of 11.4% compared to the previous year. The company’s net profit for the year stood at Rs 26,679 crore, which represents a year-on-year increase of 12.5%.
Despite the year-on-year increase in revenue and profits, investors appear to have been spooked by the company’s weak guidance for the upcoming fiscal year. Infosys expects its revenue growth to slow down to between 6.5% and 8.5% in the fiscal year 2023-24, which is below analysts’ expectations of double-digit growth.
The weak guidance is attributed to the ongoing uncertainty surrounding the global economy, including the impact of the COVID-19 pandemic and geopolitical tensions. Infosys CEO, Salil Parekh, said in a statement, “We expect the demand environment to remain volatile and unpredictable in the near term, driven by factors including the ongoing COVID-19 pandemic, geopolitical tensions, and supply chain disruptions.”
In addition to the weak guidance, Infosys also announced that it would be increasing its employee count by over 35,000 in the upcoming fiscal year, which will put pressure on the company’s margins. The move is seen as a strategic decision to capitalize on the increasing demand for digital services, but investors are worried that it could impact the company’s profitability.
The sudden drop in Infosys’ share price on the BSE has come as a shock to investors, who had been optimistic about the company’s growth prospects. Infosys has been one of the best-performing stocks on the BSE in recent years, with its share price increasing over 50% in the past year alone.
Despite the drop, some analysts believe that Infosys’ long-term growth prospects remain intact, citing the company’s strong balance sheet, digital capabilities, and focus on innovation. However, it remains to be seen whether Infosys can live up to investors’ expectations and deliver strong growth in the upcoming fiscal year.
Infosys’ weak guidance for the upcoming fiscal year and its decision to increase its employee count have spooked investors, leading to a significant drop in the company’s share price. However, some analysts believe that the company’s long-term growth prospects remain strong, and it will be interesting to see how Infosys navigates the volatile and unpredictable demand environment in the coming months.
According to Anil Singhvi, the Managing Editor of Zee Business, the results of Infosys were unsatisfactory with a negative outlook. He anticipates support for INFY futures to arise at around Rs 1,200-1,245 levels. Credit Suisse has downgraded the stock to ‘neutral’ from ‘outperform’ and has lowered Infosys share target price to Rs 1,240 from Rs 1,760, indicating a potential decline of 10.7% from the previous day’s closing price.
In addition to the downgrades, several experts have also lowered their target prices for Infosys shares. CLSA has revised its rating to ‘outperform’ from ‘buy’ and cut its target to Rs 1,550 from Rs 1,800. JP Morgan has revised its rating to ‘Underweight’ from ‘neutral’ and lowered its target to Rs 1,200 from Rs 1,500. Citi has revised its rating to ‘neutral’ from ‘buy’ and cut its target to Rs 1,400 from Rs 1,675. Morgan Stanley has maintained its ‘Overweight’ rating but reduced its target to Rs 1,475 from Rs 1,625. Jefferies has maintained its ‘Buy’ rating but lowered its target to Rs 1,570 from Rs 1,770. Nomura has revised its rating to ‘neutral’ from ‘buy’ and cut its target to Rs 1,290 from Rs 1,660. Macquarie has revised its rating to ‘neutral’ from ‘outperform’ and reduced its target to Rs 1,400 from Rs 1,770. HSBC has maintained its ‘Buy’ rating but reduced its target to Rs 1,550 from Rs 1,775.
The lower target prices indicate that the experts are cautious about the stock’s future performance. However, it is worth noting that the current target prices are still higher than the current market price of Infosys shares, which closed at Rs 1,263.45 on Friday, a decline of 13.49%.
In conclusion, Infosys’ weak Q4 results and poor guidance have led to a sharp decline in its stock price. While some experts remain optimistic about the stock’s future, several others have downgraded their ratings and lowered their target prices. It remains to be seen whether Infosys can turn things around in the coming quarters and regain the market’s confidence.
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