Shares of Infosys tumbled over 9% in early trade on Friday after the country’s second-largest software exporter sharply lowered its revenue growth guidance for FY24, which spooked investor sentiments. The IT major projected its FY24 revenue guidance to be in the range of 1-3.5% in constant currency (CC) terms, compared to the earlier forecast of 4-7%. The company trimmed the revenue guidance even after the total contract value hit an eight-quarter high of $2.3 billion in the April-June period of FY24 (Q1FY24).

Continuing its losing streak for the third straight session, Infosys shares opened sharply lower at ₹1,321, down 8.8% from its previous closing price of ₹1,448.85 on the BSE. In the first two hours of trade so far, the IT stock has fallen 9.5% to ₹1,311.60 on the back of strong volume trade. A total of 7.4 lakh shares changed hands over the counter on the BSE against a two-week average volume of 4.58 lakh crore. The IT company's market capitalisation stood at ₹5.54 lakh crore at the time of reporting.

Infosys shares trade 8% higher than its 52-week low of ₹1,215.45 touched on April 25, 2023, while they are down 21.5% from their 52-week high of ₹1,672.45 hit on December 1, 2022. In the last year, the IT heavyweight has delivered a negative return of 13%, whereas it lost 13.5% in the six-month period. On the year-to-date (YTD), the counter has lost more than 12%, while it gained 3% in a month. In the past week, the large-cap stock shed 6.5%.

In a post-market filing on Thursday, Infosys released its earnings for the June quarter, which saw its net profit growing by 10.9% to ₹5,945 crore in the quarter ending June 30, 2023, as compared to ₹5,362 crore in the year-ago period. The company's revenue from operations surged 10% to ₹37,933 crore, up from ₹34,470 crore in the same quarter last year. Operating profit increased 14.1% to ₹7,891 crore YoY, while the operating margin of the company increased marginally to 20.8% from 20.1% in the year-ago period, largely led by lower operating expenses and a favourable currency mix during the quarter. 

In dollar terms, Infosys' revenue surged 3.9% to $4,617 million on a YoY basis, while its net quarterly profit increased 5.1% to $724 million.

In constant currency, Infosys' revenue growth surged 4.2%, while it increased 1% on a quarterly basis. The company recorded a 12.4% YoY increase in earnings per share in rupee terms.

The management reduced revenue growth guidance for FY24 to 1-3.5% in CC terms, while margins guidance was kept at 20-22%.

According to analysts at Axis Securities, the management is cautious about the demand scenario in North America. However, Europe stands comparatively resilient. “Given the company’s medium-term challenges on demand and uncertain supply-side constraints, we expect Infosys to report moderate growth in FY24,” the brokerage says in a report.

The brokerage recommended a ‘Sell’ rating on the Infosys stock with a target price of ₹1,300 per share, implying a downside of 10% from the current market price.

The agency believes that global uncertainties and economic slowdown may impact the automation spend and result in delays in investment decisions in North America from where the company earns its majority of the revenue ( around 40%). “IT services are expected to have lower demand in the near term. As compared to North America, Europe is expected to have resilient demand and positive investment to continue. As these uncertainties will settle down in the next two to three quarters, the demand scenario will gain momentum once again and would be backed by consistent deal wins.”

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