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Wipro shares target cut to $4 from $7, hold rating maintained

EditorLina Guerrero
Published 12/13/2024, 01:07 PM
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WIT
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On Friday, CFRA maintained its Hold rating on Wipro Ltd (NS:WIPR). (NYSE:WIT) but lowered the stock's price target to $4.00 from the previous $7.00. The adjustment comes in response to Wipro (NYSE:WIT)'s 1-for-1 bonus issuance.

The new price target is based on a forecasted unchanged forward price-to-earnings (P/E) ratio of 24 times for the fiscal year ending March 2026, which aligns with the valuation levels of the company's peers but is slightly higher than its 5-year average P/E ratio. Currently trading at a P/E ratio of 27.55x, InvestingPro data shows the stock has gained nearly 31% year-to-date and is approaching its 52-week high of $3.75.

The revised price target reflects updated earnings per share (EPS) estimates for Wipro, now set at INR11.13 for the fiscal year 2025 and INR12.33 for the fiscal year 2026, down from the previous estimates of INR22.25 and INR24.66, respectively.

The analyst believes that the valuation fairly accounts for Wipro's solid organic growth potential driven by artificial intelligence (AI) and digital-related structural demand. InvestingPro analysis reveals the company maintains a strong financial health score of 3.38, labeled as "GREAT," with particularly robust profitability metrics.

However, the analyst also notes that potential risks could dampen Wipro's growth. These include the possibility of a broader deceleration in corporate IT spending due to uncertain macroeconomic conditions. Despite ongoing discussions surrounding generative AI and its demand, the analyst expects Wipro's top-line growth to remain moderate. This is attributed to cautious spending budgets among Wipro's core customers.

Given the stock's current trading at above-average P/E ratios and the absence of significant positive catalysts, CFRA's stance remains neutral. The firm indicates that it will continue to observe the market for signs of improved secular demand before changing its position on Wipro's stock.

In other recent news, Wipro Ltd. reported a 21% increase in revenue to INR 6.12 billion for the second quarter of the fiscal year 2025, though total revenue remained relatively flat at INR 223 billion.

The company's operating profit margins improved to 16.8% due to better overall utilization, which rose to 86.4% from 84.5%. Wipro's total contract value for deals remained steady at $3.6 billion, aligning with the last four-quarter average. CFRA has updated the price target for Wipro to $7.00 from $6.50, while maintaining a Hold rating.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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