Infosys, the Indian multinational IT company, has been in the news recently for all the wrong reasons. The company’s shares have taken a sharp hit after it reported weak Q4 earnings. The shares tanked 15% and hit a 52-week low, sending shockwaves through the Indian stock market. This has left many investors wondering whether they should buy or sell Infosys shares.
In this article, we will take a closer look at the reasons behind Infosys’ poor performance, and offer some advice on whether investors should hold, sell or buy Infosys shares.
What caused Infosys shares to tank?
The first question that comes to mind is why did Infosys’ shares take such a massive hit? The company reported a 2.3% sequential decline in its net profit for the quarter ended March 2023, which missed analysts’ expectations. The company’s revenue growth was also below expectations, with a 0.8% sequential decline.
Apart from the weak Q4 earnings, Infosys also lowered its revenue growth guidance for the financial year 2023. The company now expects revenue growth to be between 6% and 8%, down from its earlier estimate of 8% to 10%. This further dampened investor sentiment and led to a sharp fall in the company’s shares.
Should you buy Infosys shares?
After the sharp fall in Infosys shares, the question on every investor’s mind is whether this presents a good buying opportunity or not. Here are some factors to consider before making a decision:
1. Valuation
Despite the recent fall in the stock price, Infosys shares are still not cheap. The stock is trading at a price-to-earnings (P/E) ratio of around 26, which is higher than the industry average. This means that investors are paying a premium for the company’s earnings.
2. Growth prospects
Infosys has been facing tough competition from its peers in recent years, and its growth prospects are somewhat limited. The company’s revenue growth has been declining in recent quarters, and its revised revenue guidance for 2023 is not very encouraging. However, the company is investing heavily in new technologies like artificial intelligence, blockchain and cloud computing, which could drive growth in the future.
3. Dividends
Infosys is a dividend-paying stock, which means that investors can earn a steady income from their investments. The company has a good track record of paying dividends and has been increasing its dividend payout ratio in recent years. This makes Infosys shares an attractive investment option for income-seeking investors.
Should you sell Infosys shares?
If you are an existing Infosys shareholder, the recent fall in the stock price might be a cause for concern. Here are some factors to consider before making a decision to sell:
1. Losses
If you bought Infosys shares at a higher price and are now facing losses, it might be tempting to sell the shares and cut your losses. However, this might not be the best decision in the long run. Stock prices tend to fluctuate in the short term, and selling at a loss could mean missing out on potential gains in the future.
2. Risk tolerance
Investing in stocks always carries some degree of risk. If you are a risk-averse investor and cannot tolerate the volatility in the stock market.
3. Company fundamentals
If you are a long-term investor, it is important to consider the fundamentals of the company before making a decision to sell. Despite the recent setback, Infosys is still a solid company with a good track record. The company has a strong balance sheet, a good reputation in the industry, and a diversified customer base. If you believe in the company’s long-term prospects, it might be a good idea to hold on to your shares.
Conclusion
Infosys shares have suffered a major setback after the company’s weak Q4 earnings. While the recent fall in the stock price might present a good buying opportunity for some investors, it is important to consider the company’s valuation, growth prospects and fundamentals before making a decision to buy or sell. If you are an existing Infosys shareholder, it might be a good idea to hold on to your shares if you believe in the company’s long-term prospects. Ultimately, the decision to buy, hold or sell Infosys shares should be based on your investment objectives, risk tolerance and long-term outlook.
FAQs
The fall in Infosys shares was caused by the company’s weak Q4 earnings and its lowered revenue growth guidance for the financial year 2023.
It depends on your investment objectives and risk tolerance. While the recent fall in the stock price might present a good buying opportunity, the company’s valuation and growth prospects are not very encouraging.
Yes, Infosys is a good dividend-paying stock with a good track record of paying dividends and increasing its dividend payout ratio in recent years.
Infosys is investing heavily in new technologies like artificial intelligence, blockchain and cloud computing, which could drive growth in the future. However, the company’s revenue growth has been declining in recent quarters, and its revised revenue guidance for 2023 is not very encouraging.