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Business News/ Markets / Stock Markets/  Wipro share price falls 3% post Q2 results; should investors buy, sell or hold the stock?
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Wipro share price falls 3% post Q2 results; should investors buy, sell or hold the stock?

Wipro share price declined 3 per cent on BSE on Thursday, October 19, a day after the IT company released its July-September quarter (Q2) earnings.

Wipro share price fell over 4 per cent in early trade on Thursday. AFP PHOTO/Ralphson DAVID (AFP)Premium
Wipro share price fell over 4 per cent in early trade on Thursday. AFP PHOTO/Ralphson DAVID (AFP)

Wipro share price declined 3 per cent to close at 395.20 on BSE on Thursday, October 19, a day after the IT company released its July-September quarter (Q2) earnings. 

Wipro share price has significantly underperformed the equity benchmark Sensex in the last one year. The stock has gained just about 4.6 per cent in the last one year while the Sensex has gained about 11 per cent in the same period. Wipro share price hit its 52-week high of 443.60 on September 15 this year and its 52-week low of 351.85 on April 17 this year on the BSE.

Wipro Q2 Results

As Mint reported earlier, Wipro’s revenue in the fiscal second quarter totalled $2.71 billion, a 2.3 per cent sequential decline and a 3.7 per cent fall from the year-ago period. In constant currency terms, sequential growth fell 2 per cent. Net income fell 9 per cent sequentially to $318.5 million amid a 13 per cent jump in expenses.

Wipro’s performance in the first six months of the current financial year has lagged behind its larger rivals, with the company’s revenue in the April-September period declining 1.5 per cent from a year earlier. During this period, Tata Consultancy Services Ltd (TCS), Infosys Ltd and HCL Technologies Ltd recorded a dollar revenue growth of 5.7 per cent, 3.7 per cent and 5.2 per cent, respectively.

Read more: Wipro posts third straight sequential revenue drop

Meanwhile, the Azim Premji-backed company announced that its board had approved the merger of five of its wholly-owned subsidiaries with itself into ‘Wipro Ltd’.

The five subsidiaries include Wipro HR Services, Wipro Overseas IT Services, Wipro Technology Product Services, Wipro Trademark Holding, and Wipro VLSI Design Services, according to a regulatory filing by the company to the stock exchanges today.

Also Read: Wipro Q2 Results: Board approves merger of 5 wholly-owned subsidiaries into ‘Wipro Ltd’; check details

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Should you buy, sell or hold the stock?

Experts and brokerage firms are not very optimistic about Wipro stock post the company's September quarter earnings.

Kotak Institutional Equities maintained a 'reduce' call on the stock and cut the target price to 375 from 405 earlier.

Kotak highlighted that Wipro reported another weak quarter with a revenue decline of 2 per cent at the lower end of guidance. It said Q3FY24 guidance of revenue decline of 1.5 per cent to 3.5 per cent indicates the persistence of weak trends.

"Wipro is on a sticky wicket with continued growth underperformance versus peers, senior executive attrition, lack of mega deals and revenue leakage. We cut FY2024-26 revenue and EPS (earnings per share) estimates by 3-5 per cent and 6-7 per cent, respectively. Valuations of 16 times FY2025E are inexpensive but justified considering weak growth characteristics," said Kotak.

Brokerage firm Motilal Oswal Financial Services has a 'neutral' view on Wipro with a target price of 418. The brokerage firm cut its FY24 and FY25 EPS estimates by 8.2 per cent and 5 per cent, respectively, to factor in a weaker FY24 growth due to the third quarter of expected decline.

"Given Wipro’s weak Q2FY24 revenue growth and weak Q3 guidance, we expect its FY24 topline growth to be one of the lowest among tier-1 IT services peers, with a margin below the management’s medium-term guided range of 17-17.5 per cent," Motilal Oswal said.

"We maintain our neutral rating as we await: (1) further evidence of the execution of Wipro’s refreshed strategy, and (2) a successful turnaround from its struggles over the last decade before turning more constructive on the stock. Our target price of 418 implies 18 times FY25E EPS," said Motilal Oswal.

Among the global brokerage firms, HSBC maintained its hold call on the stock with a target price of 350, reported CNBC-TV18.

"Wipro is undoubtedly impacted by demand slowdown. There are also clear signs of market share loss. Wipro is stuck between an undemanding valuation and weak business traction," CNBC-TV18 reported HSBC saying so about Wipro.

Besides, BofA Securities maintained its underperform call on Wipro with a target price of 350 and Citi maintained a sell call on the stock and cut the target price to 360 from 385, reported ET Now.

Read all market-related news here

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

 

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Published: 19 Oct 2023, 09:30 AM IST
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