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Infosys (NSE: INFY) share price retreated in the United States and India after the outsourcing giant published weak financial results. Its India-listed shares dropped to ₹1,441, lower than this week’s high of ₹1,500. Similarly, its US listed stock fell by 9% to $16.
Growth is slowing
Infosys is a leading company that provides services in the information technology industry. It implements complex IT systems for the leading companies around the world. It has expertise in all industries, including banking, airline, and insurance.
Infosys and its peer companies like Cognizant, IBM, and Accenture implement solutions like cloud computing and artificial intelligence.
Infosys results showed that the company’s revenues jumped from $4.4 billion in the second quarter of 2022 to over $4.6 billion. Its gross profits rose from $1.3 billion to $1.4 billion, helped by the company’s cost cuts. Infosys managed to grow its net profit from $689 million to over $724 million.
While the company’s results were better than estimates, the shares dropped sharply because of the lowered guidance. Infosys warned that many of its customers were continuing with cost cuts as they deal with elevated inflation.
Analysts have been a bit cautious on Infosys this year. In May, analysts at JP Morgan initiated their coverage with an underweight rating and a price target of $14. Similarly, analysts at Macquarie, BMO Capital Markets, Nomura, and Citigroup have a bearish view on the stock.
Still, a case can be made about Infosys now that inflation is falling in most developed countries. US inflation dropped to 3.0% in June while UK’s numbers fell to 7.9%. Falling inflation could see companies start to invest later this year.
The challenge for Infosys is that it is a bit overvalued compared to rivals. It has a trailing PE ratio of 25 compared to Cognizant’s 15 and Capgemini’s 21.
Infosys share price forecast
The chart below shows that Infosys share price has been in a strong recovery in India. It managed to move from the year-to-date low of INR 1,170 to a high of 1,497. As it rose, the shares rose above the 61.8% Fibonacci Retracement level. It also moved above the 50-period and 25-period moving averages.
Therefore, I suspect that the shares will resume the bullish trend in the coming days. More upside will be confirmed if the price moves above this month’s high of 1,497 INR. If this happens, the next level to watch will be at 1,550 INR.
The post Infosys share price fell after weak guidance: buy the dip? appeared first on Invezz.