To guide or not to guide seems to be the question doing the rounds among analysts tracking the Bangalore-based information technology services provider, Infosys.
Infosys has discontinued its practice of providing quarterly revenue guidance from the start of financial year 2013.
As the company prepares to announce its fourth quarter and annual results for FY13, analysts are wondering if the current macro-volatility will make the firm rethink on providing annual revenue guidance as well.
Infosys discontinued the practice of providing dollar revenue guidance from the first quarter ended June 30, 2012.
“Our stance on the company does not fundamentally change should Infosys break with its tradition of guidance. It might create a one-time stock impact due to a section of the market disapproving of this, but investors/Infosys can move on thereafter. Infosys deserves the benefit of doubt on one score - if it could retain guidance in more difficult times, suspending it now in a decidedly-better environment should not raise questions on Infosys’s motives or raise suspicions on its confidence in its growth prospects for the coming year,” said Viju George and Amit Sharma of J P Morgan Asia Pacific Equity Research in their report.
The report also mentions that the move may perhaps not go to well with investors in the West.
In India, though the analysts remain divided on what Infosys should do, several leading brokerage and equity research analysts that Business Standard spoke to said that in the near-term, such an action will be negative for the stock.
When asked whether it intends to permanently discontinue giving quarterly guidance and whether it also plans to rethink on providing an annual guidance, the company declined to comment.
A look at the stock performance shows that although there is initial pain, in the long-run, it is the business performance that counts.
For instance, the day Infosys announced its first quarter FY13 results on July 12, 2012, the firm’s shares during intra-day was down almost 10