Infosys shares nosedive nearly 15%: Here's why
Infosys, India's second-largest IT firm, recently announced its quarterly results. The company's performance in the fourth quarter of FY23 was underwhelming at best. The company has now started this trading week in a disappointing fashion. Its shares tanked nearly 15% in morning trade, the most in intraday trading since the COVID crash. Now, let's take a look at why Infosys's shares are sinking.
Infosys missed the street's estimates
Infosys's January-March quarter results were termed "disappointing" by many analysts. The company missed analysts' estimates for both top-line and bottom-line growth in Q4. The company's consolidated net profit and revenue declined compared to the December quarter. Infosys not only missed the street's estimates for the last quarter but also gave a very conservative outlook for FY24.
Company's FY24 revenue outlook spooked investors and analysts
More than Infosys's performance in the last quarter, it was its outlook for this financial year that triggered the sell-off. The company expects revenue growth of 4-7% in the financial year ending in March 2024. This is well below analyst expectations of 6-8%. Some analysts even expected the company to grow by around 10% in FY24. This is what spooked investors and analysts.
There is a moderation in demand for Infosys's services
If that wasn't enough, Inofosys's statement about moderation in demand has also put investors on edge. "During the quarter, we saw unplanned project ramp-downs in some of our clients, and delays in decision-making, which resulted in lower volumes. In addition, we had some one-time revenue impact," said CEO Salil Parekh. The 4-7% guidance represents a considerable moderation in demand.
Banking turmoil in the US and Europe affected Infosys
Infosys's poor fourth quarter result and conservative FY24 guidance are closely related to what's happening/happened in the United States and Europe. North America is the company's biggest source of revenue. The collapse of two American banks has put significant pressure on the financial ecosystem. Europe isn't any different. The fall of Credit Suisse was too much for the market to digest.
Companies have reduced spending due to economic uncertainties
The banking turmoil wasn't the only problem Infosys was dealing with. It simply added to all the existing macroeconomic concerns around the world. The global economy is walking on eggshells. Fears of a recession have only magnified over the past few months. The uncertainties surrounding the economy have prompted companies to defer their spending, affecting IT services firms like Infosys.
Infosys's market capitalization fell by Rs. 73,000 crore
On Monday, Infosys's shares opened trading at Rs. 1,250.30 apiece. Soon after that, the price went as low as Rs. 1,185.30, down by 14.67%. The company's stock recovered a little after that. It is currently trading at Rs. 1,253.5, down by around 10%. The plunge in morning trade wiped out the company's market capitalization by over Rs. 73,000 crore.
The company recorded its 52-week low today
Infosys's dismal performance today resulted in its 52-week low price of 1,185.30. The company's 52-week high was Rs. 1,757.50. The company's share price return in the past year is -28.09%.
Few analysts maintain Infosys's 'Buy' status
Despite Infosys's shocking Q4 results, Jeffries and HDFC Securities have maintained the company's 'Buy' status. Nomura, a brokerage firm, downgraded the company to 'Neutral.' In the short term, delay in deal closures is set to affect the price. Lower margins and unfavorable currency could also affect the price. However, many analysts expected IT discretionary spending to come back strongly in the long term.
