Infosys Q4 Results: Analysts downgrade, cut price targets by 5-23% post earnings shocker
Analysts tracking Infosys have either downgraded or cut their price targets on the stock, or done both of these after the company’s March quarter earnings shocked the street.
Infosys reported results after market hours on Thursday and missed expectations on all fronts. The company expects constant currency revenue growth of 4-7 percent in financial year 2024, compared to consensus expectations of 6-8 percent.
The company also reported a 3.2 percent decline in constant currency revenue (adjusted for exchange rate fluctuations), which is the worst in at least a decade.
Brokerage firm Nomura has cut Infosys’ earnings estimates for financial year 2024-2025 by 8-9 percent, driven by lower revenue and margin estimates. It has also downgraded the stock to neutral from the earlier rating of buy and cut its price target by over 22 percent to Rs 1,290 from Rs 1,660 earlier.
Nomura believes that the company’s guidance deal wins indicate a weak outlook. Deal wins in the March quarter stood at $2.1 billion, the lowest in three quarters. Nomura expects Infosys to report US Dollar revenue growth of 6.9 percent in financial year 2024 and 8.9 percent in financial year 2025.
Another brokerage that has cut its price target by nearly 23 percent is Reliance Securities. The firm has downgraded the stock to sell from the earlier rating of buy and also cut its price target to Rs 1,350 from Rs 1,750 earlier. Reliance Securities said that weaker guidance and lower earnings growth led to contraction in valuations. It expects the cut in spending to continue in financial year 2024 as well.
Ambit has maintained its sell rating on Infosys and cut its price target to Rs 1,340 from Rs 1,505 earlier. It has also warned that the results have raised risks for the sector with players like LTIMindtree most vulnerable to the BFSI exposure.
DAM Capital has also downgraded Infosys to Neutral from Buy and cut its price target by 14.7 percent to Rs 1,390. It expects structural reduction in margins led by large bets and supply challnges that will keep EPS growth in check. The note further said that Infosys’ growth may trail TCS in the near-term.
However, brokerages like Motilal Oswal have maintained their buy rating on the stock, although it has also cut its price target to Rs 1,520. The brokerage believes that the growth recovery for Infosys is likely to be pushed to financial year 2025 once the demand environment becomes more favourable. It expects the revenue miss to impact the stock’s short-term performance by high-single to low-double digits.
Another brokerage with a buy rating on Infosys is Emkay, who has also cut its price target to Rs 1,620 from Rs 1,700 earlier. “We believe Infosys is well positioned to capture the growth opportunities across digital transformation, cost efficiency and consolidation-led deals over the medium term,” the note said. For financial year 2024-2025, Emkay has cut Infosys’ Earnings per Share estimate by 4.4-6.3 percent.
US-listed shares of Infosys ended 10 percent lower on Thursday to their lowest level in over two-and-a-half years.
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