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Wipro Jumps 3.5% after Q1 Earnings Despite Brokerages Cutting Stock Price Targets

For Representation (Image: Reuters)

For Representation (Image: Reuters)

Wipro’s IT services business missed analyst expectations, falling 1.6% sequentially to Rs 14,351.4 crore in the June quarter. IT services revenue in dollar terms fell 1.76% sequentially to $2,038.8 million.

Wipro Ltd shares jumped over 3.5% in intraday trade on Thursday, i.e. 18 July after the IT Company announced its June quarter earnings. The stock price was up despite global brokerage houses cutting price targets for Wipro on account of subdued revenue growth.

At 11:50 am, Wipro shares were trading at Rs 268.40, up 3.4%, on BSE. The stock has risen 26% in the last one year.

Wipro’s IT services business missed analyst expectations, falling 1.6% sequentially to Rs 14,351.4 crore in the June quarter. IT services revenue in dollar terms fell 1.76% sequentially to $2,038.8 million. Wipro said it expected IT services dollar revenue in the range of $2,039-2,080 million for July-September quarter, a growth of 0-2% over the June quarter.

After the earnings announcement, global brokerages stayed bearish on the stock and said Wipro may not be able to achieve its FY20 revenue target given weak start to earnings.

Brokerage house Jefferies maintained ‘underperform’ rating on the stock while cutting the target price to Rs 225 from Rs 245. It said revenue in the first quarter was disappointing and on top of that, Q2 growth guidance was also tepid at 0-2% despite low base. “We cut revenue and earnings estimates over FY20-21 and expect growth underperformance to continue.”

Citi had a ‘sell’ rating on the stock with a target price of Rs 250. It said Wipro lags peers and will likely end up with mid-single-digit revenue growth in FY20. Citi trimmed FY20/21 EBIT (earnings before interest and tax) estimates by 2-5%.

Brokerage BNP Paribas maintained its ‘hold’ rating on Wipro, but cut the stock target price to Rs 270 from Rs 280 earlier. “The second-quarter margin could be affected by a two-month impact of wage hikes. Recurring FY20 revenue growth may weaken compared to FY19,” BNP Paribas said in its note, while cutting FY20-22 EPS (earnings per share) estimates by 2-3%.

Nomura had a reduce rating on the stock with a target price of Rs 235 compared with Rs 260 earlier. It said no signs of turnaround are visible for Wipro and it was unlikely to achieve its FY20 guidance of revenue growth ahead of FY19.

Credit Suisse also had ‘underperform’ rating on the Wipro stock with a target price of Rs 240.


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