Wipro Q4: Why analysts are cautious on stock despite good performance

Wipro

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Driven by a better-than-expected earnings performance, investors on Wednesday bet positively on Wipro as it rallied over 2 percent intraday.

The software major reported its results for the quarter ended March 31 which was ahead of analysts’ estimates with respect to IT services segment rupee revenue and margins, but revenue guidance for Q1FY17 missed expectations.

Analysts remained cautious on the stock on the back of weak guidance, rupee strength, and pressure on margins, among others.

CLSA reiterated its buy call on the stock with a lower target price of Rs 590 from Rs 600. The research firm observed that growth was driven by strong traction across BFSI and manufacturing, a rare feat achieved by the company. Furthermore, stronger outlook for energy, BFS and synergies will keep growth palpable, it added.

However, the company’s guidance at 0 to -2 percent for the first quarter of this fiscal will keep recovery momentum at bay in FY18. Additionally, it cut revenue expectations by 1.5 percent and earnings per share (EPS) by 2.5 percent, but sees growth recovering from the fourth quarter of the fiscal.

Meanwhile, Bank of America Merrill Lynch reiterated its neutral stance on the stock with an increase in target price to Rs 500 from Rs 480. The company’s Q4 revenue growth was in line with estimates and marginally ahead of the consensus, it observed.

While it has cut FY18/19 EPS by 5 percent on weaker than expected profitability and rupee strength, it also expects FY18 margin to be compressed by 50 basis points year on year due to the currency’s headwinds.

Signalling a cautious stance on the information technology (IT) major, Nomura maintained a reduce rating with a lower target price of Rs 430 from Rs 435. It was wary of the limited organic growth, lack of signs of turnaround as well as pressure on margins.

In fact, the weaker positioning in key markets were likely to be a drag on margins. The research firm expected FY17-19 revenue/EPS CAGR f 4 percent and 2 percent, respectively and said that the EPS cuts were driven largely by lower growth expectations and margin pressures.

Wipro was the least preferred stock for Nomura among Tier-I IT firms. Among the key upside risks for the stock are better than expected revenue growth and stronger margin.

With an implied 5 percent downside, Goldman Sachs was neutral on the stock with a target of Rs 450. The global financial firm cut its estimates by up to 2 percent for FY18-19 due to weaker guidance.

With the implied weakness in the IT sector, Wipro has lost 2 percent over the past one month, while its three-day gain stood at 0.2 percent. At 10:56 hrs Wipro was trading flat. It touched an intraday high of Rs 513.00 and an intraday low of Rs 494.35.