Why Route Mobile Share Price is Falling

2023 began on a positive note for growth stocks in the software industry, providing some relief from the worst year for tech stocks in over a decade.

However, concerns are emerging as the rally's momentum appears to be diminishing, which could result in another tech downturn.

With the earning season kicking in, it looks like another shot in the arm for tech stock mounting a big comeback.

One company, in particular, that has been affected by this dwindling rally is Route Mobile. Over the past month, its share price has dropped by 6%, with a 4% decline in just the past five days.

Nevertheless, this is not the first time that Route Mobile shares have come under intense pressure, as they experienced a similar decline in December 2022.

Back then, we wrote an editorial explaining why Route Mobile share price is falling.

Let's now delve into reasons why Route Mobile is experiencing pressure again.

#1 Mirroring Nifty IT index

Amid the selloff in IT stocks with TCS kickstarting the quarterly earnings season on Wednesday, the Nifty IT index emerged as the worst performer, falling 1.7%. Nine of the ten constituents comprising the IT index fell sharply.

Although TCS reported a net profit growth of nearly 15%, it flagged concerns of deferred spending and near-term uncertainty in its banking, financial services, and insurance (BFSI) segment.

Following the update major tech stocks like Infosys, Tech Mahindra, HCL Tech, and Wipro were also trading in negative territory.

Route Mobile being no exception to this falling downturn in the sector, fell prey to it.

#2 Reduced IT spending

As per the data released on 12 April 2023, consumer inflation in the US decreased to 5% in March, but it remained significantly higher than the Federal Reserve's target, despite the several interest rate hikes over the past year.

Consequently, it is highly probable that the Federal Reserve will increase interest rates again in the coming month.

This has led to the Federal Reserve predicting a minor recession later in the year, causing concerns over the IT sector's clients' spending cuts and dampening market sentiment.

As it may pose challenges to IT firms in sustaining their businesses in the coming one to two quarters.

Additionally, recent events in US regional banks have raised caution about IT companies facing margin pressure in the next few quarters.

As Indian IT companies receive approximately 40% of their business from the BFSI sector in the US and European countries, any aggravation of the economic crisis in the US severely impacts the business volume of Indian IT companies. This further dampened sentiment for the stock, dragging Route Mobile down.

How Route Mobile shares have performed recently

Route Mobile shares have declined by more than 5% in a month. Over the past week, the company's shares have traded lower by 4%.

Over the year, shares of the company have eroded over 19%.

Route Mobile touched its 52-week high of Rs 1,728 on 4 May 2022 while it touched a 52-week low of Rs 1,052 on 23 June 2022.

About Route Mobile

A global information technology firm, Route Mobile also specializes in cloud communication platform services (CPaaS). Along with this, it also runs a relatively small business process outsourcing (BPOs) unit.

The company has an expansive product portfolio which includes smart solutions in messaging, voice, email, and SMS filtering, analytics and monetisation. It caters to enterprises, over-the-top players, and telecom operators.

The company has been meeting the needs of a diverse clientele across geographies since 2004, enabling enterprises and mobile operators to deliver efficient services to their customers.

For more details, see the Route Mobile company fact sheet and quarterly results.

For a sector overview, read our IT sector report.

You can also compare Route Mobile with its peers:

Route Mobile vs Infosys

Route Mobile vs Tanla Platforms

Also to know CPaaS stock is better, check out Tanla Platforms vs Route Mobile: Which IT stock is better.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...