Infosys share price has remained on edge in the past few months as consulting companies go through a major disruption. It dropped to ₹1,134, a few points below last week’s high of ₹1,198 as several analysts downgraded it following its recent earnings report. It remains 34% below its highest point last year.
Analysts are downgrading Infosys stock
Infosys, one of the biggest companies in the IT consulting industry, is going through a difficult patch this year amid the artificial intelligence technology disruption. The same is happening among its top competitors like Cognizant Technologies, Accenture, and Wipro, which have continued to underperform the market.
Analysts have taken note and downgraded the company. Axis Capital, Arihant Capital, and IIFL Capital have all slashed their targets recently. As a result, the company’s consensus rating has now dropped to 3.7 from 5, the lowest level since January 2024.
READ MORE: Why Accenture’s strong Q4 earnings aren’t enough for TD Cowen
The downgrades came after the company published its earnings report, which the management decided to slash its outlook. It said that its revenue rose by 1.5% in the second quarter to $5.145 billion, with its operating margin remaining stable at 21%. Its AI revenue rose by 29% and accounted to 10.5% of the total revenue, while the free cash flow was $928 million.
The company’s revenue growth was smaller than expected as companies continued to leverage AI in their businesses. It was also lower as companies prioritized other spending in a bid to cut costs across their businesses. For the year, Infosys expects that its revenue will grow by between 1% and 2%, with its operating margin being between 20% and 22%.
Infosys’ business will likely remain under pressure in the foreseeable future as companies go from one challenge to another. Many firms are now facing inflationary pressures as the US-Iran war continues, pushing crude oil prices to the highest level in five months. Transport costs have also continued rising this year.
On the positive side, Infosys has become a highly undervalued company, with a forward price-to-earnings ratio of 15, which is lower than the sector median of 21. Its five-year average is 21.
Infosys share price technical analysis
INFY stock chart | Source: TradingView
The daily chart shows that the INFY stock price bottomed at ₹981 in July and then bounced back to the current ₹1,131. It has moved now bounced back and moved above the descending trendline that links its highest levels since April.
The stock has also moved above the 50-day Exponential Moving Average (EMA), while the two lines of the MACD indicator have moved above the neutral level. All these technicals are bullish for the stock.
At the same time, it formed an inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis. Therefore, there is a likelihood that it will continue rising as bulls target the key resistance level of ₹1,280. This rally will be confirmed if it moves above the resistance level of ₹1,198.
The post Infosys share price analysis amid analysts' downgrades: is it a contrarian buy? appeared first on Invezz