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Brokerage firm Morgan Stanley has downgraded shares of Wipro Ltd
. on Monday, January 19, and cut its price target on the stock to among the lowest on the street.
Morgan Stanley has downgraded Wipro to "underweight" from "equalweight" and cut its price target to ₹242 from ₹270 earlier.
The brokerage wrote in its note that an improvement in deal wins and a strong margin performance in the past had reflected in Wipro closing the gap on its price-to-earnings multiple with its peers over the last 12 months.
However, the company's guidance for the fourth quarter suggests a slower conversion of deals into revenue and weaker growth visibility for the new financial year in comparison to its peers.
This is likely to widen the price-to-earnings multiple discount versus its peers back, which had narrowed recently.
Wipro has guided for its constant currency revenue growth for the fourth quarter to be between 0% to 2%, while analysts were working with a figure of 1% to 3% earlier.
Jefferies also maintained its "underperform" rating on Wipro with a price target of ₹220, stating that softer deal bookings and delays in ramp-ups have led to a weaker-than-expected growth guidance for the fourth quarter.
The brokerage expects Wipro's margins to remain under pressure due to the recent acquisitions and deals ramping up.
47 analysts have coverage on Wipro, of which, only 11 of them have a "buy" rating on the stock, 21 say "hold" and 15 have a "sell" rating on the stock.
Shares of Wipro had ended 2.5% higher on Friday at ₹266.8 before the results announcement. However, the US-listed shares, or ADRs, ended over 7% lower in reaction to its results and guidance.
Morgan Stanley has downgraded Wipro to "underweight" from "equalweight" and cut its price target to ₹242 from ₹270 earlier.
The brokerage wrote in its note that an improvement in deal wins and a strong margin performance in the past had reflected in Wipro closing the gap on its price-to-earnings multiple with its peers over the last 12 months.
However, the company's guidance for the fourth quarter suggests a slower conversion of deals into revenue and weaker growth visibility for the new financial year in comparison to its peers.
This is likely to widen the price-to-earnings multiple discount versus its peers back, which had narrowed recently.
Wipro has guided for its constant currency revenue growth for the fourth quarter to be between 0% to 2%, while analysts were working with a figure of 1% to 3% earlier.
Jefferies also maintained its "underperform" rating on Wipro with a price target of ₹220, stating that softer deal bookings and delays in ramp-ups have led to a weaker-than-expected growth guidance for the fourth quarter.
The brokerage expects Wipro's margins to remain under pressure due to the recent acquisitions and deals ramping up.
47 analysts have coverage on Wipro, of which, only 11 of them have a "buy" rating on the stock, 21 say "hold" and 15 have a "sell" rating on the stock.
Shares of Wipro had ended 2.5% higher on Friday at ₹266.8 before the results announcement. However, the US-listed shares, or ADRs, ended over 7% lower in reaction to its results and guidance.
