Infosys Shares Today: Shares of top software services exporter Infosys fell up to 3 per cent to day’s low at Rs 1,379.70 on BSE in Friday’s session after the IT services major upset the Street with lower revenue for the quarter ended March 31, 2024.
The IT gaint reported a sequential revenue decline of 2.2 per cent in constant currency (CC) terms and missing estimates.
Amid persistent weakness in discretionary spending due to caution on macro recovery, Infosys provided an underwhelming CC revenue growth guidance of 1 per cent-3 per cent YoY for FY25, below market estimates. EBIT margin (adjusted for one-off charges in Q3) declined 100 bps QoQ to 20.1 per cent.
The dim guidance comes on the back of its weakest-in-history full-year dollar-revenue growth of 1.9 per cent for FY24, driven by revenue declines in its biggest business banking, financial services and insurance (BFSI), as also from its biggest region, North America.
Its previous slowest growth of 3 per cent was in the year ended March 2010. In constant currency terms (which eliminates the effect of currency movement), Infosys’s FY24 revenue growth came in at 1.4 per cent, lower than the 1.5-2 per cent guidance it had given in January.
While declaring its fourth-quarter and full-year earnings on Thursday, the company said its Q4 (January-March 2024) revenue slipped sequentially by 2.1 per cent, hurt by lower demand from US businesses and from banks.
Investors gave a thumbs-down to the results. In pre-market trading at the New York Stock Exchange, Infosys’s shares were down 8.3 per cent to $15.56. The results were declared after market hours in India.
However, the performance did not stop the company from announcing its largest acquisition yet on Thursday, a $480-million buyout of In-Tech, a German engineering research and development firm. In-Tech had $181 million in revenue last year and Infosys expects to close this acquisition in the first half of the current fiscal.
What Analysts Say?
Despite the fourth quarterly earnings missing the estimates, brokerages maintained their ‘buy’ and ‘neutral’ calls on the stock. However, the target prices were slashed.
Nomura said: “We lower our FY25-26F EPS by 2-3 per cent driven by lower revenue and margin outlook. Our FY25-26F EPS are 6.6-7.3 per cent below consensus. Our new target price of Rs 1,400 (Rs 1,500 earlier) is set at an unchanged 20x FY26F EPS.”
“Despite near-term weakness, we expect Infosys to be a key beneficiary of the acceleration in IT spending in the medium term,” said Motilal Oswal.
Nuvama Institutional Equities concurred, believing that Infosys’s growth shall pick up as discretionary spends revive in H2FY25. However, the brokerage said the stock may remain sideways until then and underperform peers such as TCS.
Citi added that if all things remain the same, investors should continue to accumulate Infosys shares on dips, at around Rs 1,350 levels. However, the brokerage has reduced the target multiple to 24x given the lower growth.
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