Infosys Q1 results: Brokerages downgrade ratings, scrip slides 8% on weak guidance

Infosys shares fell 8 percent In early trade in exchanges after it cut its guidance almost in half First quarter earnings call on Thursday.

The company sharply cut its revenue guidance for the year from 4-7 percent to 1-3.5 percent, as it expects longer deal cycles and spending cuts on turnaround deals. American Depositary Receipts (ADRs) also fell 11 percent on the New York Stock Exchange.

Due to the significant downgrade in guidance, many brokerages downgraded the stock. Nomura downgraded Infosys to reduce the target to ₹1,210 from ₹1,260, and cut the EPS estimate by 3-4 percent. Similarly, Macquarie downgraded Infosys shares to underperform and set a target of €1,130. JP Morgan also gave it an underweight rating with a target of INR 1,150.

Jefferies and HSBC gave Infosys (a) Buy rating and has given a target of $1,550 and Rs 1,540 respectively. BoFA Sec gave it a neutral rating with a target of $1,390.

Nomura noted that weakness in growth swells as guidance is cut and expects Infosys to underperform industry growth in FY24. Analysts note that Infosys will lag behind its peers in FY24.

Sanjeev Hota, Head of Research, Sharekhan of BNP Paribas, said, “We view Infosys’ Q1 earnings performance as a negative share read, driven by significant revenue on guidance revision, and also on a relative basis Infosys is willing to lag industry-wide growth in FY24 to peers such as tcs and HCL technology.”

Institutional securities firm HDFC notes that the low probability event has repeated in consecutive quarters with guidance downgraded, three times in the first quarter in the last 14 years after declining sequential revenue, eight times in the past 60 quarters in the previous quarter for Infosys.