MphasiS stock price falls. Results and HP strategy a major concern

MphasiS came out with its quarter results and its net profit was down by 16%, year-on-year (y-o-y). Even compared to the previous quarter (q-o-q) net profit fell by 0.73%.

Revenues for the company fell by 5.83% y-o-y to Rs 916.6 crore, meanwhile the same grew by 10.74% on a q-o-q basis.

The stock also faced the double whammy from the investors as its mother company Hewlett-Packard (HP) decided to spin-off PC business and go the IBM way completely into services. The new focus on the services and enterprise solutions can translate into gains for MphasiS.

There are analysts which expect that this move will benefit MphasiS but none are sure if it actually make any difference to the subsidiary. Then the other set of analysts have slammed the entire strategy of HP, their arguments is that the company has a leadership position in the computer space where as it will be playing 'catch-up' in other segments of the business with IBM, Accenture and everyone else.

Combining the two concerns, the investors dumped the stock.

View: It is difficult to state much on the stock at the given price. Momentum investors will find that selling the company at this point would make sense. Fundamental investors should keep in mind that the back of the envelop calculation, book value per share plus the earnings per share, shows that stocks fair value will be approximately Rs 200.

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