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Why Infosys Shares Got Crushed

By Brian D. Pacampara, CFA - Apr 12, 2013 at 1:22PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Indian IT services giant Infosys (INFY -1.41%) plummeted 20% today after its quarterly results and guidance disappointed Wall Street.

So what: The stock soared earlier this year on optimism over its strategic revamp, but a fourth-quarter revenue miss -- $1.94 billion versus the consensus of $1.99 billion -- coupled with downbeat full-year guidance is forcing investors to sober up. Management blamed continued weakness in global IT spending for the disappointing report, triggering concerns in close peers Wipro and Cognizant Technology Solutions -- both down about 5% today -- as well.

Now what: Management now expects fiscal 2014 revenue growth of between 6% and 10%, below the average analyst estimate of 11%. "We are progressing well on our strategic direction of building a high-quality company which is relevant to our clients," CEO S. D. Shibulal reassured investors. "We are making all the investments necessary to differentiate ourselves in the market place while positioning ourselves as a partner of choice for our clients." With the stock still 15% above its 52-week lows and trading at a forward P/E of 14, however, I'd wait for even more of a pullback before buying into that optimism.

Interested in more info Infosys? Add it to your watchlist.

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Stocks Mentioned

Infosys Limited Stock Quote
Infosys Limited
INFY
$18.14 (-1.41%) $0.26
Wipro Limited Stock Quote
Wipro Limited
WIT
$5.77 (-2.04%) $0.12
Cognizant Technology Solutions Corporation Stock Quote
Cognizant Technology Solutions Corporation
CTSH
$71.69 (0.41%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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