The American Depository Receipts (ADRs) of Wipro Ltd saw a significant increase of 17 percent on Friday, indicating positive momentum for the company. This was followed by a 13 percent stock rally on Monday morning at domestic bourses, which should not come as a surprise to investors. Analysts have noted that Wipro is the only IT major, out of the four that have released their December quarter results, to show green shoots in discretionary spending. However, analysts remain cautious and would like to see more before becoming outright bullish on the stock.
On Monday, Wipro’s stock surged by 13.10 percent, reaching a high of Rs 511.95 on the BSE. Over the past month, the IT scrip has witnessed a 15 percent increase, outperforming HCL Technologies Ltd, Infosys Ltd, and Tata Consultancy Services Ltd, which have seen rises of 7 percent, 5 percent, and 2 percent respectively.
Analysts at JM Financial believe that Wipro’s Q3 performance indicates an inflection point. The company’s revenue degrowth came towards the upper end of the guided band, marking a positive shift after four consecutive quarters of decline. Additionally, the next quarter’s guidance is incrementally better, following three quarters of sequentially lower bands. JM Financial notes that Wipro’s consulting business, CAPCO, experienced double-digit booking growth, which is seen as a quantitative sign of a rebound in discretionary spending. As the environment improves, Wipro’s rebound is expected to strengthen.
Also read := POCO which country brand
Axis Securities, on the other hand, highlights that Wipro has lagged in its execution despite achieving better results and deal wins. However, it predicts a potential recovery in FY25, supported by strong deal wins. Due to a lack of necessary visibility, Axis Securities recommends a ‘Sell’ rating on the stock.
HDFC Institutional Equities states that Wipro’s trajectory is ‘recovering’ after a 6 percent drop in quarterly revenue over the past three quarters. While there has been improved commentary on the consulting business, Wipro’s growth markers remain stressed, including a loss of deal market-share to peers, a broad-based decline within verticals, and a steep decline in T5 accounts. Wipro has been focusing on driving growth through its partner ecosystem and is addressing improvements in its operating profile by making changes to the operating structure, such as portfolio focus in APMEA, absorbing the growth office function within the Strategic Market Units, building a Delivery cadre, and emphasizing training.
In conclusion, Wipro’s recent stock rally and green shoots in discretionary spending have generated interest among investors. While analysts remain cautious, they acknowledge the positive signs in Wipro’s performance. As the company continues to focus on its growth strategies and addresses its operational challenges, it is expected to further strengthen its position in the IT sector.
1 thought on “Analysis: Wipro’s Stock Rally and Green Shoots in Discretionary Spending”