Infosys shares plunged nearly 9 per cent on Thursday following the company’s gloomy forecast this quarter but brokerage firms aren’t ringing the alarm bells yet.
At Barclays investor meet on Wednesday, SD Shibulal, CEO of Infosys, cautioned that revenues are expected to be at the lower end of its 9-10 per cent guidance as clients were hesitant to spend on technology. This resulted in the stock falling 8.5 per cent to close at ₹3,357.50 at the end of day’s trading, after a healthy run in the last six months, when it had risen 20 per cent.
Analysts have a mixed view on this development. According to Shashi Bhusan of Prabhudas Lilladher, despite the challenges cited by Infosys’ management, the deal book is healthy and includes $1.6 billion worth of outsourcing contracts in addition to $700 million worth of deals booked till date. “NR Narayana Murthy, Chairman of Infosys, follows the philosophy: ‘ Bad news should take the elevator, but good news should take the stairs’. Hence, the likelihood of aggressive guidance looks unlikely. However, we remain confident of improving demand environment and increased focus by Infosys to win large deals to start yielding results in FY15,” the analyst said.
“This is the old Infosys — promise less and deliver more,” said AK Prabhakar, former head of Equity Research, Anand Rathi. He has put a ‘buy’ on the stock with a target price of ₹4,500 in fiscal 2015. Other brokerages share a similar viewpoint.
According to a note put out by Barclays analysts Bhuvnesh Singh and Hitesh Das, despite the possibility of the stock reacting negatively “due to near-term weakness, we retain our ‘overweight’ rating based on our revised 12-month price target of ₹3,960, which is slightly lower than its previous target price”.
Deutsche Bank has put a hold rating on the stock with a target price of ₹3,600. However, Bank of America-Merrill Lynch cut its target for Infosys from ₹4,300 to ₹4,000.