Bengaluru Sep. 9: Shares of Infosys Ltd., the country’s second largest software services company, continued their downward trend for the sixth consecutive day on Wednesday (September 9). The value of Infosys shares, which fell by 4.55 percent intraday, fell to Rs.1,032.80. During this 6-day decline, the value of Infosys shares has fallen by 11 percent overall, resulting in a loss of more than Rs.40,000 crore in the company’s market capitalization.
In the first three days of trading this week, Infosys shares were the worst performers in the ‘Nifty IT’ index. Apart from Infosys, other IT giants like Coforge, Tech Mahindra, Wipro, HCL Tech, Empasys, TCS, LTIM and Persistent Systems also fell by 3 to 6 percent. The Nifty IT index has fallen by 6 percent this week.
Global brokerage firm JP Morgan has given a “Neutral” rating to Infosys shares and has set a target price of Rs.1,050 per share.
AI technology and pressure on prices: Companies are turning to AI technology to increase productivity, which has led to ‘AI-led deflation’ in the sector. However, the brokerage said that the intensity of this price decline may decrease as the use of AI technology becomes normal.
Revenue Growth Challenge: AI-based revenue growth requires strong demand, slowing inflation and increased discretionary spending by organizations.
Sectoral Demand: Currently, IT services are in good demand in the banking and financial services, utilities and energy (SURE) and manufacturing sectors. However, demand is slowing in the telecom and retail sectors.
Margin Protection and Project Maximus: Although competition in vendor-consolidation deals has intensified, Infosys is not accepting deals that could hurt its margins. The company expects to reinvest the savings from its ‘Project Maximus’ in sales, partnerships and employee reskilling. It is also open to new acquisitions (M&A) based on valuation.
Analyst Opinion and Stock Status
According to Bloomberg data, 29 out of 49 economists who analyze Infosys shares have recommended Buy, 16 Hold and 4 Sell. The experts have a 12-month average target price of Rs.1,201.18, which indicates a potential gain of 16% from the current price.
On Wednesday, Infosys shares fell 4.55% to Rs.1,032.80. The stock has fallen 13% in the last one month and has lost 37% in value this year (YTD). Infosys’s 8.4% decline in the week is the biggest decline in the IT sector.