Shares of Wipro Ltd. (NYSE: WIT) surged as much as 10% to hit a fresh 52-week high of Rs 511.95 on the National Stock Exchange (NSE) on Monday, January 15, following the company's better-than-expected December quarter earnings. Wipro's American Depository Receipts (ADRs) also jumped nearly 18% to reach a near-20-month high of $6.35 after the company reported its results on January 12.
Mixed Bag of Results
Wipro's net profit declined 12% year-on-year to Rs 2,694 crore, and consolidated revenue came in at Rs 22,205 crore, down 4.4% year-on-year. However, analysts at Motilal Oswal viewed the company's Q3 performance as positive, given its struggles to meet expectations over the past few quarters due to macroeconomic headwinds.
This is the fourth consecutive quarter in which Wipro has reported a fall in profits year-on-year. Analysts expect Wipro to continue underperforming its peers, primarily due to a low correlation between its deal wins and top-line growth.
Reasons for the Surge
Despite the profit decline, there were several reasons behind the stock's surge:
- Beat Estimates: Wipro's results were better than what analysts had anticipated.
- Large Deal Wins: The company won large deals worth $0.9 billion in the quarter, indicating potential future growth.
- Improved Order Bookings: Total order bookings stood at $3.8 billion, similar to the September quarter, suggesting sustained demand.
- Muted Q4 Guidance: While Wipro's guidance for the fourth quarter was muted, it was still within expectations.
Analysts' Views Remain Mixed
While the stock's surge indicates optimism among some investors, analysts remain cautiously optimistic.
- Motilal Oswal: Sees signs of gradual improvement and expects revenue growth to improve over FY24-FY26.
- Nuvama Institutional Equities: Remains concerned about Wipro's low correlation between deal wins and top-line growth and the continuous exits of employees.
- IDBI Capital: Upgraded its rating to "Buy" due to Wipro's ability to win large deals, robust order bookings, and client mining efforts.
- Morgan Stanley: Maintains an "Underweight" rating due to lower visibility compared to peers and less favorable relative valuations.
- Nomura: Issued a "Reduce" rating due to weak Q4 guidance and soft deal wins.
Overall, Wipro's Q3 earnings were a mixed bag. While the company beat estimates and showed signs of improvement, analysts remain cautious due to ongoing concerns about its growth prospects. The stock's recent surge may be a short-term reaction to the better-than-expected results, but it remains to be seen whether Wipro can sustain its momentum in the long run.
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