Infosys shares extend fall post Q4; should you buy or sell?

Shares of Infosys, the country’s second largest software exporter, extended losing streak on Wednesday, with the stock price falling as much as 11% in two of three trading sessions post March quarter earnings report, which has left investors and analysts worried. The shares of Bengaluru-based company hit a 52-week low of ₹1,219 intraday on April 17, registering its highest single-day loss since March 2020, after the IT major missed Street expectations on both top-and bottom-line metrics and gave a slower revenue growth guidance for financial year 2023-24. The company's market capitalisation also declined by ₹62,477 crore to ₹5,13,592 crore intraday today from ₹5,76,069 crore at the end of trade on April 13.

On Wednesday, Infosys shares opened marginally lower at ₹1,257.60 against the previous closing price of ₹1,260.95 on the BSE. During the session so far, the IT heavyweight declined as much as 1.9% to ₹1,236.50 amid surge in selling activities. On the volume front, 5.3 lakh shares changed hands over the counter as compared to two-week average volume of 5.08 lakh stocks by 1:30 PM. The stock ended 0.23% higher on Tuesday after plunging 9.4% on Monday.

At the current price level, Infosys shares trade 26% lower than its 52-week high of ₹1,672.45 touched on December 1, 2022. In the last one month, the stock has fallen 12%, while it shed nearly 17% in six-month period and 21% in the past one year. The largecap stock has lost 19% in the calendar year 2023.

The weakness in Infosys shares were also partially due to broad-based sell-off across BSE IT index after Tata Consultancy Services (TCS), the country’s largest software services firm, kicked off earnings season for India's information technology sector on a subdued note.  On April 12, TCS released its Q4 results, which saw its PAT rising 14.8% year-on-year (YoY) and 5% sequentially to ₹11,392 crore in March quarter of 2022. This was lower than the average estimated PAT of ₹11,530 crore.

Meanwhile, Infosys reported 7.8% YoY rise in consolidated net profit at ₹6,128 crore for the March quarter compared with ₹5,686 crore in the same quarter last year. On the quarter-on-quarter (QoQ) basis, the profit de-grew by 7% from ₹6,586 crore in the December quarter of 2022. The consolidated revenue from operations jumped 16% to ₹37,441 crore in Q4FY23, as against ₹32,276 crore in the corresponding quarter last fiscal. Sequentially, the revenue dropped 2.3% from ₹38,318 crore in Q3FY23. The board of the company has also declared a third dividend of ₹17.50 per share for the fiscal year FY23. In the past 12 months, Infosys declared an equity dividend of ₹32.50 per share.  

Here’s what top brokerages recommend on Infosys shares post Q4 results:

Following March quarter results, most analysts have either downgraded or cut their price targets on Infosys shares.

Foreign brokerage JPMorgan has lowered Infosys to underweight and cut its price target by 20% to ₹1,200 from ₹1,500 projected earlier, citing an uninspiring commentary and an "ambitious guidance" post the margin miss.

Another global brokerage Citi also cut price target and downgraded the stock. It has assigned a neutral rating on Infosys, with a price target of ₹1,400 from ₹1,675 earlier.

Nomura has also slashed rating on Infosys to neutral from buy and cut its price target by over 22% to ₹1,290 from ₹1,660 earlier, saying that the company's guidance deal wins indicate a weak outlook.

Bucking the trend, Jefferies has maintained a buy on the stock with a price target of ₹1,570 despite calling Infosys Q4 results "shocking".

Among domestic brokerages, HDFC Securities and Axis Securities have also cut ratings and lowered price targets. While HDFC Securities downgraded Infosys to 'Add' from an earlier 'Buy' stance and revised downward the target price to ₹1,470 from ₹1,830 earlier, Axis Securities has assigned sell rating on the stock with a price target of ₹1,350 from ₹1,800 earlier.

Meanwhile, Kotak Institutional Equities maintained buy ratings on the stock but cut the price target to ₹1,470 from ₹1,700 earlier. BOB Capital Markets also continued with a buy rating with an unchanged target of ₹1,760.