Wipro shares crash 9% on weak Q1, soft guidance; brokerages cut price targets

Shares of Wipro plummeted over 9% in intraday trade on Monday after the IT major reported lower than expected earnings in June quarter, which was in contrast to positive growth delivered by peers such as TCS, Infosys and HCL Tech during the quarter under review. The sentiment was further dented as analysts turned bearish on the stock after the Bengaluru-headquartered firm guided for -1% to +1% QoQ revenue growth for the next quarter. Wipro released its Q1 results on July 19, with its topline dropping by 3.8% and the profit increasing by 4.64% year-on-year (YoY).

Weighed down by weak Q1, shares of Wipro declined as much as 9.5% to ₹503, while the market capitalisation slipped to ₹2.63 lakh crore. On July 19, the day earnings were released, the American depositary receipts (ADRs) of Wipro crashed nearly 12% on the NYSE after the IT services company missed quarterly earnings estimates.

Early today, Wipro shares made a gap-down opening for the second straight session at ₹520, down 6.7%, after ending lower by 2.8% at ₹557.25 on Friday. The counter witnessed strong volume as more than 16 lakhs shares changed hands over the counter compared to two-week average of 5.9 lakh stocks.

The IT heavyweight touched its 52-week high of ₹580 in intraday trade on Friday, rebounding nearly 55% from its 52-week low of ₹375 touched on October 26, 2023. The stock has underperformed the BSE IT index in the last year, in terms of returns in 12 months, year-to-date (YTD), 3 months, and 1 month period. The counter has risen nearly 24.9% in the past 12 months versus 34.7% growth in the BSE IT index, while it added 7.25% on YTD compared to the 12.6% rise in IT index. Wipro shares delivered 11.6% and 3% returns in 3 months and 1 month period, respectively, as against 18.7% and 12% surge in IT index, respectively, during the same period.

Brokerages turn bearish, downgrade stock

Post Q1, Motilal Oswal reiterated its ‘Neutral’ rating on Wipro, with a target price of ₹500, down 10% from the current price. “We have cut our FY25E EPS by 1% and kept FY26E EPS broadly unchanged after its 1Q print. We reiterate our Neutral rating as we view the current valuation as fair. Our TP implies 20x FY26E EPS.” it says in a note.

ICICI Securities has downgraded the stock to ‘Sell’ from ‘Reduce’ with a revised target price of ₹460 versus ₹430 earlier. “We revise down our FY26-27 EPS by 6%/5% on weak performance and guidance. We note key portfolio problems in the company, with some components dragging down growth,” it says in a report.

Prabhudas Lilladher has maintained “Hold” rating on the stock with a target price of ₹530, citing the results were mixed with miss on revenue but in-line margin. “Revenue conversion remains a challenge for the company, given its exposure to discretionary areas. The core business challenges and macro uncertainties would keep the top-line growth unstable in the near term,” it says.

Meanwhile, Axis Securities has recommend a ‘Sell’ rating on the stock with a price target of ₹470, saying that the company has lagged in its execution despite achieving better results and higher deal wins. “However, FY25E may show some recovery backed by strong deal wins. Due to lacking the necessary visibility, we recommend a SELL rating on the stock,” it says.

On the other hand, Nuvama has retained ‘HOLD’ with an upgraded price target of ₹530 from ₹460 earlier. “Management is seeing momentum in consumer and U.S. BFS, although Wipro’s performance and guidance failed to inspire. We are tweaking FY25E and FY26E (< 2% each) due to a slightly lower growth assumption. We are introducing FY27 estimates and rolling over the valuation to 20x Sep-26E PE (earlier 18x) on improving industry growth environment.”

JM Financial has also retained ‘Buy’ with a revised target price of ₹ 620, valuing the stock at 22x (from 20x), maintaining historical discount to Infosys’ target multiple (27x). “The management's increased confidence heading into Q2, alongside a notable rebound in the BFSI consulting sector and expected benefits from recent deal wins, suggests a positive trajectory ahead. While Q2 may show some softness due to ramp-up delays in recent contracts, we anticipate Wipro to capitalise on a potential uptick in discretionary spending.” it says in a note.

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