Are Current Valuations of IT Stocks Worth Opportunities to Invest during Recession?2 min read
In this article, we will be discussing a survey conducted by Morgan Stanley. So, let’s check what this survey is about, what are its findings, and how is it related to investors.
- Morgan Stanley has conducted a survey of the Chief Information Officer (CIO) of IT Companies between 6th August 2022 to 6th September 2022. The survey has presented some near-term challenges
Findings of the Survey:
- As per the survey, IT spending growth during the current quarter i.e., July to September, the third quarter of the calendar year is expected to be around 2.6%.
- Overall there is growth in the IT Spends but the pace is slow. In Q3CY21, IT Spending growth of Fortune 500 companies was 4.8%, which then fell to 3.8%, 3.6%, and 3.5% during Q4CY21, Q1CY22, and Q2CY22 respectively.
- These CIOs have also expected the IT Spending growth to be around 2% in CY23.
- Vendors like Infosys, TCS, HCL Tech, etc. are willing to give discounts on new contracts. This willingness was 26% in Q2CY23, which has now gone up to 29% in Q3CY22.
- All these scenarios are similar to the crisis of the year 2008, but findings also suggest that the severity this time will not be much.
- Moving toward the positive factor, then we can notice that the IT companies have recorded robust revenue growth post-2008 financial crisis. IT Companies such as TCS, Infosys, HCL Tech, etc. have recorded revenue growth of around 5.5 times. While the profit growth of these companies has grown by around 400-450%
- The stock price of these IT companies has gone up by around 15-20 times during the same period.
What Should Investors Do?
The recession period is a golden period for long-term investors as this is the opportunity during the recession period due to the availability of quality stocks and good business at an attractive valuation. Hence an investor should take advantage of this opportunity but should follow due diligence before making any investment decisions.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.