Brokerages Raise Target Price On Wipro Citing Earnings Cheer, Buyback Boost
Brokerages are optimistic about Wipro’s performance in the September quarter.
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Wipro Ltd. clocked its biggest intraday gain in almost four years as better-than-expected earnings, and a Rs 11,000-crore buyback prompted price target hikes from brokerages.
The information technology firm’s April to June quarter profit dropped 8.1 percent sequentially missing consensus estimate, but the revenue in dollar terms came in higher than the company’s forecast in March.
Also Read: Wipro Board Approves Rs 11,000-Crore Buyback
Here’s what top brokerages had to say post the June quarter earnings.
‘Wipro Deserves Investors’ Love'
Wipro’s dollar revenue surpassed expectations driven by the improvement in the banking, financial services, and energy verticals, CLSA wrote in its research note. “Mining in top-10 clients recovered further,” added the brokerage.
The Rs 11,000-crore buyback adds to the attraction of the stock, according to CLSA.
The brokerage retained its 'Outperform' rating on the stock and hiked the target price to Rs 310 per share from Rs 290.
Wipro now deserves investors’ love again as it proves it is more than just a buyback play.CLSA’s Research Note
Guidance Dampener
While Wipro’s June quarter results were better than expectations, the guidance for the September quarter was softer than expected, said Morgan Stanley in its note to clients.
June quarter margins were hit by rupee appreciation, lower utilisation, and wage hikes, but the company will manage to maintain the margins in a narrow band on a constant currency basis this year, added the brokerage.
From a geographical standpoint, the U.S. and Europe were a drag on overall growth, though management indicated a robust pipeline and strong deal flow in these areas.Morgan Stanley Research Note
The June quarter earnings and the board’s decision to buy back 7 percent of outstanding stock at Rs 320 per share may lift the stock, according to the brokerage.
Morgan Stanley retained its 'Underweight' rating on the stock and hiked the price target to Rs 240 per share from Rs 215 earlier.
Healthcare Drag
Credit Suisse maintained that the second quarter guidance reflects softness in healthcare and communications verticals.
The information technology firm’s revenue growth of 0.3 percent in constant currency terms, was ahead of its guidance range and largely led by India, the Middle East and other emerging markets, stated the brokerage house in its report.
The healthcare business continues to struggle given the regulatory uncertainties in the U.S. healthcare - management expects it to bottom out in Q2, but it may drag on for longer.Credit Suisse Research Note
Wipro’s stock has done well in the last three months and now trades close to Infosys Ltd. and HCL Technologies Ltd., added the brokerage.
Credit Suisse maintained the 'Neutral' rating on the stock and raised its target price to Rs 250 per share from Rs 230.
The 12-month price target on the Wipro stock is Rs 249, according to the consensus of 52 analysts tracked by Bloomberg. 10 of the brokerages have a 'Buy’ rating on the stock.
Shares of Wipro rose as much as 8 percent to Rs 291, the biggest single-day move in almost four years. The stock has gained over 21 percent year-to-date, matching the gains in the benchmark S&P BSE Sensex Index.