Infosys Stock Drops 3% As Q4 Results Don’t Impress D-Street; Should You Buy, Sell, or Hold?
Infosys Shares Today: Following the IT services major’s surprise announcement of reduced revenue for the quarter ending March 31, 2024, the shares of the leading software services exporter Infosys plummeted as much as 3% to the day’s low at Rs 1,379.70 on the BSE on Friday.
Constant currency (CC) terms and missed forecast sales declined by 2.2% sequentially, according to the IT gain.
In the midst of ongoing difficulty in discretionary expenditure brought on by uncertainty about the economic recovery, Infosys released a very low CC revenue growth outlook of 1%–3% YoY for FY25, below market expectations. EBIT margin (adjusted for one-time costs in Q3) fell to 20.1% by 100 basis points on a quarterly basis.
The low projections follow its lowest-ever full-year dollar-revenue growth of 1.9% for FY24, which was mostly caused by revenue drops in its largest business, business banking, financial services, and insurance (BFSI), as well as from its largest area, North America.
The preceding year that concluded in March 2010 had its smallest increase to yet, at 3%. Infosys’s FY24 revenue growth in constant currency terms (which removes the impact of currency movement) was 1.4%, less than the 1.5–2% projection it had provided in January.
The firm reported that weaker demand from US companies and banks caused its Q4 (January–March 2024) revenue to decline sequentially by 2.1% while announcing its full-year and fourth-quarter profits on Thursday.
The outcomes were met with disapproval by investors. The New York Stock Exchange saw an 8.3% decrease in Infosys’s share price to $15.56 during pre-market trading. In India, the results were released outside of trading hours.
Despite this setback, the business went on and announced on Thursday that it had acquired In-Tech, a German engineering research and development company, for $480 million. This was the company’s biggest purchase to date. Last year, In-Tech brought in $181 million in sales. Infosys anticipates completing this transaction in the first half of the current fiscal year.
What Do Analysts Say?
Brokerages kept their “buy” and “neutral” calls on the stock despite the fourth quarter results report falling short of expectations. But the goal costs were drastically reduced.
We cut our FY25–26 EPS by 2-3% due to weaker sales and margin outlooks, said Nomura. Our FY25–26F EPS are 6.6-7.3% less than what is expected. Our revised goal price of Rs. 1,400 (formerly Rs. 1,500) is fixed at a constant 20x FY26F EPS.
Motilal Oswal said, “We anticipate Infosys to be a key beneficiary of the acceleration in IT spending in the medium term, despite near-term weakness.”
Nuvama Institutional Equities agreed, predicting that when discretionary spending increases in H2FY25, Infosys’s growth will accelerate. The firm said that until then, the stock may stay sideways and lag competitors like TCS.
Citi also said that investors should keep buying Infosys shares during dips, when they are around Rs 1,350, if nothing else changes. With the slower growth, the brokerage has lowered the target multiple to 24x.
