The Infosys ADR remained volatile on Friday after sinking up to 10 per cent the previous day as the company’s fourth quarter results and its tepid guidance disappointed investors.
Analysts now expect a pent-up reaction to the results on the Indian bourses on Monday — with the company announcing its fourth-quarter report card after market hours on Thursday, while the markets were closed on Friday because of Ambedkar Jayanti.
On Thursday, the shares of the country’s second-largest IT services firm had closed at Rs 1,388.60 on the BSE, a fall of 2.79 per cent over its previous close.
However, its ADR tanked around 10 per cent on the NYSE on Thursday where it settled at $15.40, a fall of 9.78 per cent. On Friday, the ADR is ruling lower at $15.31 after falling to $15.18 earlier in the day.
There was widespread disappointment among analysts when Infosys announced its results on Thursday. The tech giantmissed analyst estimates and reported a constant currency revenue growth that was lower than its own projection made after the third quarter results.
Infosys also cut the revenue growth guidance for 2023-24 even as it was lower than the forecasts of few brokerages.
Analysts have now either downgraded the stock or cut the target price: Nomura has downgraded the scrip to neutral from buy and slashed the target price to Rs 1,290 from Rs 1,660 earlier.
Reliance Securities downgraded Infosys to a sell from a buy and reduced the target price to Rs 1,350 from Rs 1,750.
However, there were other analysts who cut the EPS target, though maintaining a buy call.
A note from Motilal Oswal said that the Bangalore-based company reported a weaker quarter-on-quarter growth than its estimates.
“The fourth quarter revenue growth was surprising and is likely to have a dampening effect on the company’s 2023-24 growth, particularly since it suggests a significant impact on growth from Infosys’ discretionary business, which has been facing pressure in the recent few months due to the macroeconomic slowdown.”
“We expect 2023-24 revenue growth to be around 5.2 per cent year-on-year in CC terms, which is near the lower end of guidance band, as it takes time for the mega deal opportunities to convert into order and revenues,’’ its analysts added.
It lowered the 2023-24 and 2024-25 EPS estimates by 4 and 5 per cent, respectively.
Analysts at Emkay said that after missing revenue growth guidance for 2022-23, Infosys is likely to guide conservatively for 2023-24, given increased caution in spending by clients and prevailing macro uncertainties.
``Despite near-term challenges posed by the tough macro environment, we believe Infosys is well-positioned to capture the growth opportunities across digital transformation, cost efficiency, and consolidation-led deals over the medium term.”
“We cut our EPS by 4.4-6.3 per cent for 2023-24/2024-2025, factoring-in the disappointing fourth quarter. We maintain buy on the stock, with revised TP of Rs 1,620 per share (earlier, Rs 1,700 per share),” the brokerage said.