Why Did Infosys Stock Crash ?
Infosys’s Q4FY23 results were as follows:Consolidated revenue for Q4FY23 was Rs 37,441 crore, up 16% YoY.
Consolidated net profit for Q4FY23 was Rs 6,128 crore, up 7.8% YoY.
However, despite the company’s growth, Infosys’s share price plunged nearly 12% in early trade on April 17, 2023, after the company’s Q4FY23 earnings report. The reason for the decline was due to Infosys missing its revenue and profit estimates, leading to a reappraisal of the company’s outlook.
The views of various research firms on Infosys’s Q4FY23 results are as follows:
Motilal Oswal has maintained a ‘buy’ rating on Infosys, while reducing the target price to Rs 1,520 per share. It expects FY24 EBIT margin to be flat YoY at 21.1% and FY24 profit growth to be in a single-digit at 9.3% YoY. It has lowered the FY24-FY25 earnings per share (EPS) by 4% and 5%.
JPMorgan has downgraded Infosys to an ‘underweight’ rating and has cut its target price from Rs 1,500 to Rs 1,200 per share. It feels that uninspiring commentary and ambitious guidance post sharp miss triggered a reappraisal. As a result, it has cut revenue by 4-5% and margin by 70 bps, driving 8-9% EPS cuts over FY24/25.
Nomura has downgraded Infosys from a ‘buy’ to a ‘neutral’ rating and also cut its target price from Rs 1,660 to Rs 1,290 per share. It believes that the guidance and deal wins indicate a weak outlook for the company. Additionally, the broking house has cut its FY24-25 EPS estimates for Infosys by 8-9%.
Kotak Institutional Equities has given a ‘buy’ rating for the stock, but the target price has been cut to Rs 1,470 per share from Rs 1,700 per share. The report notes a cut in revenue growth and margin estimates, leading to a 6-7% cut to FY24-25 EPS estimates.
CLSA has downgraded Infosys to an ‘outperform’ rating from ‘buy’ and has cut its target price from Rs 1,800 to Rs 1,550 per share. It cited the weak Q4FY23 and disappointing FY24 guidance. The FY24 EBIT margin guidance has driven a 6% and 5% cut to FY24/FY25 EPS estimates.
Citi has downgraded Infosys to a ‘neutral’ rating and has cut its target price from Rs 1,675 to Rs 1,400 per share. It expects weak Q4 and uncertain macro conditions to weigh on multiples and has revised its FY24/FY25 EPS estimates lower by 4-5% while also lowering its target multiple to 22x.
UBS has given Infosys a ‘neutral’ rating and has cut its target price to Rs 1,570 per share. It believes that Infosys’s -3.2% QoQ CC revenue growth was significantly lower than expectations, and while the QoQ decline in operating margin isn’t bad.
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