Infosys shares slump 3.5% as Morgan Stanley cuts rating
Shares of Infosys Ltd dropped by 3.5% in trading session following a downgrade from Morgan Stanley, which expressed concerns over the IT sector’s macroeconomic environment and evolving technology landscape.
Morgan Stanley highlighted several key risk factors for the Challenges faced by Indian IT sector, also highlighted that Infosys had outperformed its competitor Tata Consultancy Services over the last three months. However, despite this recent success, Infosys’ valuation multiples remain at a premium compared to TCS. The analysts project that both companies are likely to see similar growth in earnings before interest and taxes (EBIT). Investing Pro analysis reveals that Infosys maintains strong financial health with a "GREAT" overall score, supported by robust profitability metrics and a moderate debt level.
The report further elaborates on the potential risks faced by Infosys in the current volatile macroeconomic environment. The analysts feels that optional spending could be delayed, posing a greater risk for Infosys compared to its peers. This is particularly concern gives the high expectations already set for the stock.
Investors are advised to note the new price target of INR1,740.00 for Infosys, as it reflects a more cautious outlook from Morgan Stanley based on the factors discussed. The firm’s decision to downgrade the stock to Equal weight is a significant adjustment from their previous Overweight rating, indicating a change in their confidence in the stock’s near-term growth potential.
In other recent news, Infosys Ltd. reported strong financial results, surpassing expectations in revenue, margins, and earnings growth. The company achieved a 1.7% quarter-over-quarter constant currency revenue increase, exceeding the consensus estimate of 1%. Infosys also revised its FY25 revenue growth forecast upward, expecting a 4.5%-5% year-over-year increase, supported by a healthy deal momentum with a total contract value of $2.5 billion. UBS analyst Shaleen Kumar reaffirmed a Buy rating, noting a 60% quarter-over-quarter surge in net new deals, which supports the company’s positive outlook.
According to Revised IT Stock Ratings by Morgan Stanley except Infosys, the brokerage lowered price targets for other major IT stocks
Market Performance
At â¹1,604.70 per share, Infosys is trading near its intraday low of â¹1,600.20, significantly down from its previous close of â¹1,661.60. The company’s market capitalization now stands at â¹6.64 trillion.
Morgan Stanley’s cautious outlook signals further headwinds for Indian IT stocks, emphasizing that companies will need to navigate a challenging business environment in the coming quarters.
