Wipro’s Stock Tumbles: Disappointing Q1 Results Rattle Investors
Faces Stock Decline After Q1 Results
After it released its quarterly results last Friday, its stock dropped significantly, closing more than 9% lower on Monday. This followed a disappointing performance that missed market expectations.
Financial Performance and Market Reaction
They reported a decline in constant currency revenue for the sixth consecutive quarter, contrary to expectations of flat growth. This led to a negative sentiment among investors, with the US-listed shares (ADRs) also falling sharply by 11.5% on Friday night.
Future Outlook and Analyst Ratings
In the September quarter, it anticipates modest revenue growth between -1% and 1% in constant currency terms. Despite the majority of analysts maintaining a cautious outlook, it’s worth noting that some have upgraded their ratings, offering a glimmer of hope. Of 44 analysts covering Wipro, 23 have a “sell” rating, while nine recommend a “buy.”
Brokerage Insights and Recommendations
Brokerage firms like Citi and Morgan Stanley continue to express reservations. Citi maintains a “sell” rating with a price target of ₹495, citing its growth differential compared to its peers and corresponding valuation challenges. Morgan Stanley, also “underweight” on the stock with a price target of ₹459, notes early signs of recovery but emphasizes the need for improved execution by them.
Market Performance and Metrics
Its stock, which closed at ₹505.35 on Monday, experienced its most significant single-day decline since April 2013. However, despite this recent setback, the stock has shown remarkable resilience, still holding an 8.6% gain for the year as of 2024.
Financial Indicators and Investor Holdings
Regarding institutional holdings, mutual funds (MFs) and foreign institutional investors (FIIs) have slightly increased their stakes during the June quarter. MF holdings rose marginally from 4.60% to 4.64%, while FII holdings increased from 6.96% to 7.12%.
Financial Performance Metrics
Their return on equity (ROE) for the most recent fiscal year was 14.43%, with expectations of a slight improvement to 15.38% in the current fiscal year and 15.72% in the upcoming year. The company has demonstrated moderate earnings per share (EPS) and revenue growth over the past three years, with further expectations for a marginal increase in the upcoming quarter.
Closing Remarks
Despite the challenges reflected in recent market performance and analyst sentiment, it’s important to acknowledge that they are navigating a dynamic business environment. The company is focusing on executing its strategies amidst varying market conditions, and understanding these challenges can foster a sense of empathy among stakeholders.