Stock Market: Are you feeling like going against the Wind?
I will not name this stock but it will not be difficult for anyone to guess the stock in question if someone goes till end of this post. I will not say that I hold significant shares of this stock, but still, they are close to my 40% of my overall portfolio. After the last rebalance of my portfolio (where I sold one of the nonperforming stocks), this is the only stock in my portfolio that is 20% down from my buying average price. Even in this downtrend, if I consider dividends paid by the rest of stocks and averaging done on those stocks at various times, rest of stocks in portfolio are now in profit or at break-even. Interestingly, I like to double down in this stock that is currently dragging my portfolio down and not sure if it even go down further.
Now there are various reasons, both internal and external to the company, that caused its market cap decline. Let me list the reasons below:
Companies did not meet expected margins.
If companies do not meet their expected numbers, then a decline in share price is expected. The same has also happened here. Unfortunately company missed it target by 0.4% (less than 1%) but observed a decline in it's share price greater than 10%.
Overall company posted 1.44 Billion USD in profits in a quarter.
Tariff hits the export companies hard.
Last quarter (Jan 2025 -Mar 2025) is a transition period in the US politics and the policies that are to be drafted going forward. With almost 50% of revenue generated by company in the US market, it is definitely impacted by any favorable or unfavorable policies implemented. Tariff is one of the policies that currently impacts it negatively.
Cut on IT spending.
Though Pentagon cut on IT spendings with 5.1 billion dollars does not directly impact the company but it is high probability that other US government departments might follow the suit and it will be the direct hit in the revenue growth.
With all this negative news, there are factors that may still favor the growth of the sector.
Future implementation of innovative technology.
We all know AI is know advancing, though AI is going to automate job but debate is always there for the "responsible AI" and lot of work I guess need to be done in it and implementing the AI in the system. I feel before AI took out jobs, IT companied have almost half a decade to implement all these technologies and who knows what else new develop in the IT trend in coming years.
Adversity might bring the best out of it.
Whenever you are in adverse condition, your innovative thinking also go on the next level. I am also assuming that the IT sector will develop and deliver something innovative that will give everyone the reason to continue on IT spendings.
My 2 cents.
As far my portfolio is considered , I think I will be doing the last averaging of this stock on coming Monday, subject to the condition that my order is fulfilled on market opening on Monday. I am taking a last bet as I feel shared dipped more than it should be. Also I am betting on the Industry leader i.e number one company in this sector in my country having 30 Billion USD in yearly revenue and part of a conglomerate group having 100+ Billion in yearly revenue. Company is one of the oldest and has crossed its 50+ years in operations in this sector. If a bull run happens in IT sector in coming days, my bet is on this company and its stock to spearhead the bull run.
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