Infosys share price witnessed a sharp decline of nearly 5% following the release of its Q3 earnings. Despite reporting an 11% year-on-year (YoY) growth in net profit, reaching ₹6,806 crore, and an 8% YoY increase in revenue to ₹41,764 crore, the results fell short of market expectations. This drop has left investors pondering their next move. So, what’s driving the slide in Infosys share price, and what should you do as an investor? Let’s dive in.
Why Did Infosys Shares Fall?
The decline in Infosys share price can be attributed to mixed sentiments surrounding its Q3 performance. While the company revised its revenue growth guidance upwards to 4.5%-5% for FY2025, this was lower than market expectations. Moreover, despite healthy earnings, D-Street wasn’t entirely convinced, resulting in a sell-off.
Adding fuel to the fire, Infosys’s US-listed shares also ended 6% lower overnight, which negatively impacted investor confidence in the Indian market.
Key Highlights from Infosys Q3 Results
- Revenue and Profit Growth:
- Net profit rose 11% YoY to ₹6,806 crore.
- Revenue increased by 8% YoY, reaching ₹41,764 crore.
- Revenue Guidance Revised:
- Infosys increased its revenue growth outlook for FY2025 to 4.5%-5% from its earlier estimate of 3.75%-4.5%.
- EBIT Margin Stability:
- The EBIT margin guidance was maintained at 20%-22%, aligning with analyst expectations.
- Deal Wins:
- Strong deal momentum, including a major deal to set up a Global Capability Centre in India.
- Free Cash Flow:
- Infosys reported its strongest free cash flow-to-net income ratio in years, a positive indicator of financial health.
What Are Analysts Saying About Infosys?
The sentiment among analysts remains mixed, with most maintaining a “buy” rating for the stock. Let’s take a closer look at some key opinions:
- Jefferies:
- Raised earnings estimates by 2%-3%.
- Projects a Compounded Annual Growth Rate (CAGR) of 11% in Earnings Per Share (EPS) for FY2025-2027.
- Reiterated Infosys as a top IT stock pick.
- Bernstein:
- Maintains an “outperform” rating with a price target of ₹2,330.
- Highlights healthy deal momentum and strong earnings.
- Morgan Stanley:
- Assigned an “overweight” rating with a target of ₹2,150.
- Anticipates accelerated growth in FY2026, supported by strong discretionary spending and deal wins.
- HSBC:
- A “buy” rating with a target of ₹2,120.
- Positive outlook on growth in Europe, banking, and US retail sectors.
- Nomura:
- A “buy” rating with a target of ₹2,220.
- Continues to see Infosys as a top pick in the large-cap Indian IT services space.
- Macquarie:
- Neutral stance with a price target of ₹1,700.
- Cautioned that certain deals, like the Global Capability Centre, may add limited value.
Infosys’s Position Among IT Giants
Infosys’s consistent deal wins, coupled with its robust financial metrics, solidify its reputation as one of India’s top IT services providers. Analysts believe the company is well-positioned to capitalize on growing demand for digital transformation services globally. However, the stock’s performance hinges on sustained revenue growth and profitability.
Infosys Share Price Performance
On January 17, Infosys share price dropped to a day’s low of ₹1,832. Despite this, many brokerages remain optimistic about the company’s future. The stock’s performance should be monitored closely as it approaches key price targets:
- Bernstein’s Target: ₹2,330
- Nomura’s Target: ₹2,220
- Morgan Stanley’s Target: ₹2,150
- Macquarie’s Target: ₹1,700
What Should Investors Do?
- Stay Informed: Monitor Infosys’s performance in upcoming quarters, focusing on revenue growth, deal wins, and margin stability.
- Long-Term Investment: If you’re a long-term investor, the recent dip might be a good opportunity to accumulate shares, considering the positive outlook from most analysts.
- Set Realistic Expectations: While Infosys remains a strong player in the IT space, short-term volatility can occur. Diversify your portfolio to mitigate risks.
- Watch Price Levels: Keep an eye on key support levels around its five-year average free cash flow multiple of 24.2 times.
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Conclusion
Despite the recent dip in Infosys share price, the company’s fundamentals remain strong. With consistent deal wins, positive management commentary, and a stable EBIT margin, Infosys continues to be a top choice for long-term investors. However, the lower-than-expected revenue guidance serves as a reminder to temper expectations and adopt a balanced approach.
As always, it’s wise to consult with a financial advisor to align your investment strategy with your goals. Whether you decide to hold, buy more, or wait on the sidelines, Infosys remains a stock worth watching closely in the dynamic IT sector
