Shares of Newgen Software Technologies Ltd. dropped by 18% on January 21, 2025, after brokerage firm Jefferies downgraded the stock from a “buy” to “underperform.” The downgrade followed the company’s December quarter results, which showed a 5.5% growth in topline revenue and a 26.5% increase in net profit. Despite this growth, Jefferies cited a slower-than-expected increase in annuity revenue and challenges in its India operations as key negative factors. While license sales grew by 70% from the previous year, longer execution cycles were affecting growth in annuity and implementation revenue.
Jefferies also reduced its price target for Newgen Software by 21%, from ₹1,500 to ₹1,240 and cut its earnings per share (EPS) estimates for FY2025-2027 by 4-6%. Despite raising its margin estimates due to the positive profit performance in the quarter, Jefferies sees the stock’s risk-reward profile as unfavorable at a price-to-earnings ratio of 55 times for FY2026, leading to the downgrade.
As a result, Newgen Software’s stock price fell to ₹1,310.8, representing a 28% drop from its peak of ₹1,794.
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