Infosys Shares Slump 5% Following Morgan Stanley Downgrade and Price Target Cut

The IT market received negative signals from Morgan Stanley when the company lowered Infosys stock rating on Tuesday March 12, 2025. The brokerage firm indicated its worry about IT sector macroeconomic conditions while noting technology industry changes. Morgan Stanley decreased its rating of Infosys to ‘Equal Weight’ while dropping its price target at ₹1,740 significantly below its previous estimate at ₹2,150. The analysts pointed to potential downward pressure on revenue growth perspectives together with lower valuation estimates as the main reason behind their decision.

Morgan Stanley identified demand softness combined with pricing pressures and global IT spending slowdown and valuation difficulties as critical risk elements for the Indian IT sector alongside currency movement advantages. TCS stands as the primary investment choice for the firm instead of Infosys and its analysts support Tech Mahindra over HCLTech and advocate Coforge over Mphasis in the mid-cap IT space.

Other leading IT companies faced price target reductions from Morgan Stanley in addition to Infosys. The analysts at Morgan Stanley lowered their target price for Coforge to ₹9,400 while keeping an ‘Overweight’ rating. Morgan Stanley kept TCS in the ‘Overweight’ category but adjusted its target price to ₹3,950 from the previous value of ₹4,660. The rating of 'Equal Weight' at HCL Tech stayed stable although its target dipped to ₹1,600 from ₹1,970. The investment firm left Tech Mahindra on its 'Equal Weight' rating but decreased its price target from ₹1,750 to ₹1,550. The current market value of the company reaches ₹6.64 trillion. The stock experienced an eleven percent decrease in value since the year began while its price-to-earnings ratio reached twenty-three point nine times according to Investing.com.

Infosys faces additional market obstacles as Morgan Stanley maintains a guarded business perspective which exposes the firm to multiple operational challenges. Morgan Stanley analysts predict that Infosys’s growth potential faces challenges from deteriorating deal wins which will emerge in fiscal year 2025 compared to the preceding year. The delay in discretionary spending gives Infosys superior risks than other competitors because its stock faces elevated market expectations.

Research by Morgan Stanley showed that Infosys surpassed Tata Consultancy Services (TCS) throughout the last three months. The recent market victories for Infosys have not lowered its valuation factors below those of its competitor TCS. The analysts expect these companies to achieve equivalent increases in their EBIT profitability metric. Infosys recorded revenue expansion of only 3.02% based on InvestingPro data over the previous twelve months. Ironically InvestingPro claims that Infosys presents a strong financial standing represented by its "GREAT" assessment rating and solid profit ratio featuring minimal debt presence.

Analysts possess different views regarding Infosys even though Morgan Stanley changed its rating to negative. Infosys delivered exceptional financial performance by exceeding market forecasts in revenue and margins while growing earnings tremendously due to its 1.7% quarter-over-quarter constant currency revenue expansion. The business now predicts revenue growth of 4.5%-5% in FY25 after raising its annual projections because it obtained $2.5 billion in total contract value from healthy deal flow. 

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