Infosys Shares Rise As Q3 Results Best Estimates; Should you Buy, Sell or Hold the IT Stock?

Shares of Infosys were down as much as 1.3 per cent on Thursday. The stock is down in 12 of the last 13 sessions and is just 1.5 per cent away from its 52-week low of Rs 1,355.50, which it fell to in September last year.

The stock of the information technology (IT) company was quoting lower for the fourth straight day, down 3.5 per cent during the period. It was trading close to its 52-week low level of Rs 1,355.50, touched on September 26, 2022.

In the past one month, Infosys has underperformed the market by falling 12 per cent as analysts believe there can be a pause or slowdown in the pace of digital/cloud programs due to a cut in discretionary spending by clients in the near term. In comparison, the S&P BSE Sensex was down 2.4 per cent during the same period. Further, in the past one year, the stock price of Infosys has dipped 27 per cent, as against 1 per cent rise in the benchmark index.

Infosys has also been plagued by recent top management exits. Mohit Joshi, who served as President resigned to join Tech Mahindra as MD & CEO, while S Ravi Kumar, who was also President and COO, quit last year to join Cognizant.

Analysts believe that Joshi’s exit may have been precipitated by CEO Salil Parekh getting an extension for the next five years. They also said that Joshi’s exit can be a short-term overhang on the stock.

Apurva Prasad of HDFC Securities believes that Infosys is going through a transition, but it is not unusual. He said that the deal flow for Infosys is very strong and the stock’s valuations are close to long-term averages.

Earlier this week, global investment bank Morgan Stanley also said that macro concerns could lead to the correction of IT stocks in the near term.

But, it added, that investors have multiple reasons to be constructive over the medium term. Of the IT pack, Morgan Stanley issued an ‘outperform’ rating to Infosys, HCL Technologies, and LTIMindtree.

“Caution among Banking & Financial Services (BFS) firms in developed markets, following recent developments around bankruptcy of Silvergate, SVB, and Signature Bank in the US and UBS-Credit Suisse merger in Europe will likely lead to further curtailing of discretionary tech spends in the near-term,” Kotak Institutional Equities said in a recent IT sector update.

This will likely impact growth for Indian IT in H1FY24, and bring down overall growth for FY24. Spending on cost take-outs will pick up, but will yield benefits in H2FY24 or later, the brokerage firm said.

“We expected a growth slowdown in FY24 to play out in the form of a weak March 2023 quarter, followed by a moderate uptick in Q1FY24, and normalization in Q2FY24. Current woes in the banking sector, however, can impact sequential growth by 1-2 per cent in Q1FY24. This assumes quick resolution to the global banking crisis and problems remaining localized to BFS,” it added.

Analysts at Nirmal Bang Securities, meanwhile, believe there is a lot of divergence in views on FY24. “We are assuming a low-mid single-digit growth from both lower volume as well as some price compression whereas consensus is building in a high single digit growth implying a soft landing in the US. We expect tighter IT spendings by customers due to a significantly weaker corporate revenue/profit picture amid a likely shallow recession in CY23 in the US (our base case). TTM net new Book TCV/Bill ratio has been at ~24 per cent for the last five quarters (not including sub-US$50mn deals) and may weigh down on growth in FY24,” the brokerage said in a December quarter result update.

Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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By jaghit

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