Wipro Shares Decline 8% Following Q1 Results: Analysts Adjust Price Targets

In the latest market development, shares of Wipro, a leading player in the information technology sector, witnessed a sharp decline of 8% in early trading on Monday. This downturn came in the wake of the company’s reported earnings for the first quarter of the fiscal year.

Wipro disclosed that it achieved a year-on-year increase of 5.21% in its consolidated net profit, amounting to Rs 3,036.60 crore for Q1. This marks a notable rise compared to Rs 2,886 crore reported for the same period last year. However, the company’s revenue took a hit, declining by 3.79% to Rs 21,963.80 crore, compared to Rs 22,831 crore from the corresponding quarter in the previous year.

For the current trading session, Wipro’s stock plummeted to Rs 513.35 on the Bombay Stock Exchange (BSE), reflecting a 7.87% fall. As a result, the market capitalization of the company dropped to Rs 2.69 lakh crore. The trading volume saw a significant movement, with a total of 5.82 lakh shares changing hands, leading to a turnover of Rs 30.12 crore.

From a technical analysis perspective, Wipro’s relative strength index (RSI) is currently positioned at 67.3, suggesting that the stock remains neither in an oversold nor an overbought territory. The stock is performing better than its moving averages over longer periods like the 50-day, 100-day, 150-day, and 200-day, but it remains below the shorter 5-day, 10-day, and 20-day averages.

Looking ahead, Wipro has projected its revenue from the IT Services business segment for the September quarter to lie within the range of $2,600 million to $2,652 million. This anticipated range indicates a possible sequential revenue change of minus 1% to 1% when assessed in constant currency terms.

In dollar terms, Wipro’s revenue from the IT services sector experienced a decrease of 1.2% sequentially, landing at $2,625.9 million, reflecting a more significant drop of 5.5% year-on-year. When considering constant currency (CC) measures, the revenue within the IT Services segment is expected to decline by 1% quarter-over-quarter and 4.9% year-over-year.

Wipro also highlighted that its operating margin for IT services stood at 16.5%, representing a slight increase of 0.1% compared to the previous quarter and a 0.4% increase year-on-year.

In light of these results, various brokerages have updated their price targets and recommendations for Wipro’s shares. Nuvama, a prominent brokerage firm, has set a price target of Rs 557 for the stock.

Nuvama commented on Wipro’s underwhelming start to the financial year, stating that although there are indicators of gradual improvement, particularly in consulting, banking and financial services (BFS), and consumer segments, the company has a long road ahead to reach industry-average growth. They maintained a ‘HOLD/SN’ rating, citing Wipro’s competitive valuation and attractive dividend yield as factors that limit potential downside risks.

On the other hand, brokerage firm Choice Broking took a more pessimistic stance on Wipro’s prospects. They have issued a ‘REDUCE’ rating with a revised target price set at Rs 558.

Choice Broking pointed out that Wipro has made considerable investments to enhance its capabilities across the organization. They underlined that the investments in the AI360 ecosystem, in conjunction with the strategic value that consulting adds for clients, would help Wipro maintain its competitive edge and resilience in the market. Despite these investments, they downgraded their rating due to significant gains in the stock’s price over the past month.

Meanwhile, Motilal Oswal, another brokerage, has adopted a neutral stance on Wipro’s shares, reducing its price target by 10% to Rs 500. They predict that the company will experience a compound annual growth rate (CAGR) of 1.4% in IT Services revenue between FY24 and FY26.

Motilal Oswal anticipates that Wipro will achieve an operating margin of 16% in FY25, which should logically translate to an 8.0% CAGR in net profit in rupee terms from FY24 to FY26. Following the first-quarter results announcement, they have adjusted their earnings per share (EPS) estimates for FY25 down by 1% but have kept the FY26 EPS largely unchanged. They reiterate a ‘Neutral’ rating, perceiving the stock’s current valuation as justified.

While Wipro’s Q1 results reflected some positive growth in net profit, the revenue decline has raised concerns among analysts and led to varied responses from brokerage houses regarding the future performance of the stock. Investors are advised to carefully evaluate these developments and consider consulting financial advisors before making investment decisions.