Five IT stocks down up to 30% from 52-week highs. Is there a turnaround in sight?

Mint

6 days ago

The Nifty IT index remains at January 2022 levels, yielding zero returns in over three and a half years to investors.
But individual stocks have fared much worse. Some of the biggest names in IT have taken a hit, dropping as much as 30% from their peaks.
Is this fall just due to market jitters, earnings misses, shifting investor sentiment, or is it a sign of deeper trouble?
Should you be looking for value when the market is worried?
We break down the top 5 IT stocks that have taken a tumble and what it could mean for investors.
Take a look…
#1 Newgen Software Technologies
First on the list is Newgen Software Technologies. It provides an enterprise-wide unified Low Code digital transformation platform, NewgenONE, designed to digitize content, automate processes, and enhance omnichannel customer engagement.
The company's offerings include Contextual Content Services (ECM) with OmniDocs, Low Code Process Automation (BPM) with iBPS, and Omnichannel Customer Engagement (CCM) with OmniOMS.
Newgen also incorporates advanced technologies such as artificial intelligence and machine learning for data science and intelligent document processing (IDP Studio) to streamline data-to-insights development and automate information extraction.
The stock is down more than 50% from its 52-week high.
Coming to its financial performance, the company has delivered a top-line growth of 24% CAGR over a 3-year period and a net profit CAGR of 24%.
The last three-year ROE has been 22%.
Looking ahead, Newgen Software Technologies' management is in investment mode for sales, marketing, and product development.
Treating Q1 FY26 as an exception, the management stated that its overall aspiration is to accelerate the growth rate above its historical growth rates and that, over the long-term outlook, they do not foresee any change, expecting growth to remain in the high teens or low 20%.
Regarding revenue and order book, management highlighted that Q1 FY26 revenues were impacted by softness in deal closures.
It was observed that customers are taking more time and being cautious in decision-making and project starts, leading to lower funnel conversion than initially anticipated.
While the deal pipeline is healthy, with a significant number of large deals, the concern is the closure of these large deals.
The management anticipates that closure rates would gradually improve in the coming quarters, leading to improvement in overall growth in the second half of the year, and that annuity revenues will continue to pick up growth as projects close.
There have been no reported deal cancellations that impacted the quarter.
The company continues to invest in R&D (9% of revenues) as well as sales & marketing (26% of revenues).
The net margin goal is around 20%. However, the management acknowledged that if growth falls substantially, margins would be affected, as the company is not currently poised to maintain margins at very low growth rates.
Also Read: HCLTech's CEO is already the richest among top five IT peers—and his pay is rising further
#2 Sonata Software
This digital engineering company operates across four key verticals: Healthcare life sciences (HLS), banking financial services (BFSI), retail manufacturing, and technology, media and telecom.
Its global presence spans five core geographies, including North America, UK, Europe, India, and Australia.
Sonata Software invests in data, AI, and modernisation engineering capabilities, utilising differentiated IP, lightning tools, and robust offerings.
The stock is down more than 45% from its 52-week high.
Coming to its financial performance, the company has delivered a top-line growth of 22% CAGR over a 3-year period and a net profit CAGR of 4%.
The last three-year ROE has been 31%.
Looking ahead, the company's ambition for the next three to five years is industry-leading growth, particularly at the intersection of AI and modernisation. It aspires to be in the top quadrant of growth in the four industries it competes in.
The company maintains a healthy, large deal pipeline, with 33% of it comprising Fortune 500 clients and 45% of the active pipeline consisting of large deals.
For profit and margin trajectory, management indicated a potential one-quarter delay in returning to the earlier target of 20%+ EBITDA margin for international services but reiterated that recovery is on track.
Furthermore, the company expanded its near-shore presence in Mexico and Malaysia, with both centres now employing more than 100 professionals.
#3 Birlasoft
Birlasoft is a leading global IT services and solutions provider, operating as a part of the multibillion-dollar CKA Birla Group.
The company focuses on cloud, AI, and digital technologies, integrating domain expertise with comprehensive enterprise solutions.
Its service offerings include digital and data, ERP, and infrastructure, catering to sectors such as manufacturing, BFSI (banking, financial services, and insurance), energy and utilities, and lifesciences and services.
The stock is down more than 40% from its 52-week high.
Coming to its financial performance, the company has delivered a top-line growth of 9% CAGR over a 3-year period and a net profit CAGR of 3%.
The last three-year ROE has been 17%.
Looking ahead, the company's endeavour is to maintain revenue growth, but there could be a minor decline in the short term. Growth is expected to return starting Q2FY26.
For the full year FY26, Birlasoft's endeavour is to deliver better revenue performance than FY25, although it may be only slightly better due to existing headwinds. It expects the overall year total contract value (TCV) for FY26 to be better than FY25's TCV.
The current discretionary/project-based business contributes about 70% of overall revenues. The endeavour is to reduce this to at least 50%, with a greater focus on multi-year annuity-based deals.
#4 KPIT Technologies
KPIT Technologies, a global technology company primarily focused on providing software solutions for the mobility sector.
KPIT specialises in embedded software, AI, and digital solutions, utilising its extensive domain expertise to help clients accelerate the development and implementation of next-generation mobility technologies.
Its work includes the development and realisation of software-defined vehicles (SDVs), electrification, advanced driver-assistance systems (AD-ADAS), body electronics, vehicle architecture, middleware, cloud-based connected services, intelligent cockpits, digital connected solutions, and diagnostics.
The stock is down more than 35% from its 52-week high.
Coming to its financial performance, the company has delivered a top-line growth of 34% CAGR over a three-year period and a net profit CAGR of 44%.
The last three-year ROE has been 31%.
Looking ahead, KPIT Technologies' management believes that any short-term uncertainties, such as those related to tariffs, are a matter of a quarter or two at most, and the conversion of orders into revenue is expected to accelerate thereafter.
The management anticipates that transformative large engagements already secured will significantly contribute to revenue growth, specifically in the second half of FY26.
Regarding the orderbook, KPIT has demonstrated consistent momentum, with deal closures progressively increasing QoQ, indicating a robust and growing pipeline.
The management expects this strong deal pipeline to continue, with hopes for closure on at least one large deal in the current quarter and acceleration in the next couple of quarters as market conditions stabilise.
#5 Tata Consultancy Services
Tata Consultancy Services or TCS, a global IT services company, provides a broad spectrum of technology services and solutions, integrating expertise in deploying technology with contextual knowledge of enterprise data, business processes, industry strengths, and change management.
The stock is down more than 30% from its 52-week high.
Coming to its financial performance, the company has delivered a top-line growth of 10% CAGR over a 3-year period and a net profit CAGR of 8%.
The last three-year ROE has been 50%.
Looking ahead, the management said the international market will perform better in FY26 than in FY25 in constant currency terms, and that it's their aspiration to continue to drive growth, although it's a high bar to cross.
Also Read: If TCS is truly preparing for the future, introspection must start in the C-suite
Conclusion
Just because a stock is down doesn't mean it's a bargain. Sometimes it's just broken and stays that way.
The IT companies here are growing. Some are investing aggressively. Others are rebuilding. But the risk is that not all of them will come out stronger.
Competitive pressure can be a catalyst. It forces companies to evolve, sharpen their edge, and come back better.
However, the same pressure can expose weak business models, poor leadership, or over-reliance on legacy clients. That's how value picks quietly become value traps.
So tread carefully. A falling stock price isn't a green light to invest. It's an invitation to investigate. Ask the question: Is this a temporary setback or a structural issue? Is the company gaining relevance or losing it?
Smart investing is less about catching the bottom and more about knowing what you're actually buying.
Therefore, it's important to conduct thorough research on financials and corporate governance before making investment decisions, ensuring they align with your financial goals and risk tolerance.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com