InvestorQ : Why have there been a spate of downgrades on the Infosys stock in the last few days?
shrinidhi Rajan made post

Why have there been a spate of downgrades on the Infosys stock in the last few days?

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2 months ago
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A day after Infosys announced its June 2022 quarterly results, there were marginal price downgrades. However, the calls have not really changed. Here are some examples.

a) ICICI Securities maintained “Hold” on Infosys Ltd but slightly downsized price target from Rs1,464 to Rs1,434.

b) Antique Stock Broking maintained “Buy” rating on Infosys Ltd but reduced the price target for Infosys from Rs2,100 to Rs2,050.

c) Prabhudas Liladhar also maintained its “Accumulate” call on Infosys but cut its price target from Rs1,646 to Rs1,630.

Here are some reasons why the stock of Infosy shas seen price downgrades. There are business level concerns that analysts see. Here is what the summary is.

· Dwindling operating Margins are a worry and this is not just unique to Infosys but applicable across IT companies. There are several headers that are seeing pressure. Manpower costs, training costs, travel and visa costs are all up and that has impacted the operating margins outlook for the coming year by 100 bps to 20%.

· Attrition is a big challenge across the IT space, and it must be sait it is a lot more acute for Infosys. In fact, the levels of attrition touched a high of 24% in the March 2022 quarter and has slightly tapered in the latest quarter, though it still remains an issue.

· Tech spending, although not too serious, is also a concern as a recession could translate into more cautious tech spending by the US and Europe based companies. These are the bulk of the clients for Infosys. It could hit volumes and margins for Infosys.

In the coming weeks, we could see more downgrades of price targets as analysts get more realistic after the dream run in the Infosys stock. Next few quarters may be crucial for the Infosys stock and the analyst view.

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