Nomura has downgraded the stock to reduce and lowered target price to Rs 450 per share from Rs 490. It is cautious on slow growth, weak margin trends and no signs of turnaround.
Citi also maintains sell rating with target price of Rs 465 per share. Stating that Wipro’s turnaround is taking longer than anticipated in a tough industry environment, it has lowered FY17-19 estimates by 1-2 percent. It expects Wipro’s organic growth in FY17 to be muted at around mid single digit levels, as multiple appears low and growth outlook remains challenged.
It maintains cautious view on the IT services industry multiple changes resulting in challenges to profitable growth.
Morgan Stanley retains underweight with target of Rs 460 per share stating that growth is still weakest among large peer which could keep valuation low. It has lowered revenue growth estimates leading to cuts of up to 2 percent in earnings per share (EPS) estimates over F2017-19.
“The stock may have valuation support, but it could trend toward 11-12 times price to equity (PE) if growth remains lackluster,” it says in a report.
Bank of America Merrill Lynch is neutral on the stock and cut FY16-18 EPS estimates by 2-4 percent and lower target price to Rs 525. It says that the quarter also did not indicate any improved success in client mining initiatives or outlook in the energy/ utilities vertical which investors have been watching as cues for any potential turnaround.
“The Appirio acquisition appears promising but also has its risks in terms of any impact to existing SAP/Oracle relations,” it says.
Other than seasonality, Q3 is also likely to be impacted by slowdown in the acquired asset of Healthplan services.
At 15:49 hrs Wipro was quoting at Rs 483.75, down Rs 15.45, or 3.09 percent on the BSE.
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