Company Reports

We are maintaining our INR 450 fair value estimate for narrow-moat Wipro after the firm closed out fiscal 2024 with financial results impacted by a slowdown in customer spending on IT services as macro uncertainty persists. The slowdown in customer spending is not unique to Wipro. The firm’s closest competitors, Infosys and Tata Consultancy Services, also reported weak results and outlooks over the last week, as customers continue to delay projects that are more discretionary in nature. While the near-term picture remains murky, we reiterate our confidence in Wipro’s long-term opportunity as secular tailwinds such as digital transformations, cloud migrations, and increased usage of AI stand to drive strategic demand for IT services vendors such as Wipro.

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.

We are maintaining our INR 450 fair value estimate for narrow-moat Wipro after the firm reported financial results below our prior estimates as we still believe the firm's financials will bounce back next year. Similar to their peers, Tata Consultancy Services and Infosys, which reported Jan. 11, 2024, Wipro's financials continued to be weighed down by weak customer demand for IT services solutions amid macroeconomic uncertainty. Nonetheless, we remain confident that this state is temporary as bookings remain healthy, indicating overall demand for and recognition of the efficiencies that come with digital overhauls of a firm's IT landscape. With shares trading up after the earnings report, we now view Wipro's shares as fairly valued.

Narrow-moat Wipro reported a mixed second quarter. While the firm came under our top-line expectations, earnings per share surpassed our forecasts. Altogether, there’s no denying the IT services industry is in a slump as customers remain conservative on discretionary projects that go along with overall digital transformation trends. Nonetheless, we remain confident that this state is temporary—as bookings remain healthy, indicating overall demand for and recognition of the efficiencies that come with digital overhauls of a firm’s IT landscape. We think the market is too pessimistic that weaker macroeconomic times have moderated long-term demand, and overall, we like Wipro’s regrouping to focus on large deal wins—which we think will add to the business’ resilience. With this in mind, we are reiterating our INR 450 fair value estimate, with shares attractively priced.

Narrow-moat Wipro reported first-quarter earnings slightly below our expectations on the top line due to near-term macroeconomic softness, especially in the Americas market. However, we are encouraged by the continued addition of major customers in the top bracket contributing over $100 million of revenue annually. Overall, we believe that once customers are acquired, they are sticky and likely there to stay. Plus, we think larger customers are stickier by nature.

Narrow-moat Wipro reported fourth-quarter results that came in under our top-line expectations as discretionary spending has slowed down, affecting verticals like consulting, in which Wipro has increased its mix over the last several years. Nonetheless, we are confident that digital transformation trends that benefit both consulting and nonconsulting revenue will be unshakable in the long term. As a result, we are maintaining our fair value estimate of INR 450 ($5.40 for U.S. ADR shares). We believe that Wipro’s stock is attractive right now, as we think the market is factoring in discretionary weakness having greater lasting effects in the long term. However, we believe that hitting the pause button on new digital transformation projects won’t have companies losing excitement for such modernizations later. We think that the same discrepancy between our view and the market is why Wipro’s peer Infosys is also undervalued, in our view.

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company will likely struggle amid the COVID-19 pandemic, we think its stable moat trend will stay secure. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company will likely struggle amid the COVID-19 pandemic, we think its stable moat trend will stay secure. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company will likely struggle amid the COVID-19 pandemic, we think its stable moat trend will stay secure. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company will likely struggle amid the COVID-19 pandemic, we think its stable moat trend will stay secure. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.

Narrow-moat Wipro reported a mixed second quarter. While the firm beat our top-line expectations, operating margins and earnings per share came in considerably lower than what we forecasted. Wipro's earnings contrast with Tata Consultancy Services results from earlier this week, which were all-around strong, lending to a fair value raise. In addition, Wipro's guidance for the third quarter was more conservative than we were bracing for even after factoring in overall macroeconomic uncertainty. All things considered, we are lowering our fair value estimate for the IT services firm to INR 460 per share from INR 500 per share. With shares down 2% upon results, this still leaves Wipro within attractive four-star territory. Despite cutting the fair value upon near term concerns, we think Wipro will benefit from overall vendor consolidation as well as margin expansion in the long run. This gives us confidence in our belief that Wipro is undervalued amidst current conditions

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company will likely struggle amid the COVID-19 pandemic, we think its stable moat trend will stay secure. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.

Narrow-moat Wipro started its fiscal 2023 with a gloomy earnings miss despite a slight revenue beat, as a culmination of pricing pressure and less-than-ideal employee attrition and utilization as well as subcontractor mix proved stronger-than-hefty IT services demand. Management stressed that it believes this is the trough of profitability headwinds, and we believe this is a fair assessment. However, this quarter's results have affected the level of margin expansion we forecast in the subsequent quarters. As a result, we are decreasing our fair value estimate to INR 500 ($6.50 for U.S. ADR shares) from INR 520 ($6.80 for U.S. ADR shares). Shares are down 2% today upon results and even with our fair value estimate adjustment, we continue to believe Wipro shares are attractively priced, as we stress to investors our faith in strong IT services demand over the next five years thanks to digital transformation projects.

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company will likely struggle amid the COVID-19 pandemic, we think its stable moat trend will stay secure. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company will likely struggle amid the COVID-19 pandemic, we think its stable moat trend will stay secure. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.

Narrow-moat Wipro reported fourth-quarter results that were worth the wait—as earnings came in several weeks after peers TCS and Infosys—an anomaly for the competitors. Results beat our EPS estimates due to nicer margins than we expected, as we thought the massive labor shortage would have a greater toll on the quarter. Considering the beat and rolling our model by another year, we are increasing our fair value estimate to INR 520 ($6.80 for U.S. ADR shares) from INR 495 ($6.90 for U.S. ADR shares). After a long stretch of the stock having been overvalued, in our view, we believe that the market is now on point in terms of pricing, even with shares down 3% after results (which we think is a reflective of overall market activity). As a result, we think investors are safe holding onto shares of the narrow moat stock at the moment. We continue to stress that we believe the labor related headwinds that the IT services industry is undergoing will ease eventually, especially with the help of automation offsetting headcount dependency.

Narrow-moat Wipro reported third-quarter results slightly above our top line expectations but fell short of our bottom line expectations due to weaker margins as a result of wage hikes and increased employee hiring, with over 10,000 employees added during the quarter. Wipro gave guidance of 2%-4% sequential revenue growth in its IT services segment for the quarter ahead. All in all, we are maintaining our INR 495 ($6.90 for U.S. ADR shares) fair value estimate for Wipro. We continue to believe Wipro is overvalued even with shares down 8% upon results--much like other Indian IT services giants Tata Consultancy Services and Infosys.

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company will likely struggle amid the COVID-19 pandemic, we think its stable moat trend will stay secure. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.

Narrow-moat Wipro posted solid results and even better guidance to close out its second fiscal quarter. The robust top-line growth, aided by continued organic and inorganic investments, was coupled with revenue guidance above our expectations for the upcoming quarter. In addition, we have upgraded Wipro’s cost of equity to a below-average rating from average. As a result, we are increasing our fair value estimate to INR 495/$6.60 per share from INR 350/$4.60 per share. With shares trading around INR 672 after results, we continue to view Wipro as overvalued. We consider other Indian IT services names Tata Consultancy and Infosys to be overvalued as well. IT services stocks have skyrocketed, with Wipro’s stock doubling in the last year alone. We think the pandemic has brought significant tailwinds to the industry, like accelerated digital demand, but that has come with headwinds, such as scarce labor. Also, we believe a substantial portion of the IT services market growing includes managed infrastructure from new workloads enabled by the cloud, which we think will favor cloud-service providers like Amazon and Microsoft.

Wipro is a leading global IT services provider with the typical menu of offerings, from software implementation to digital transformation consulting to servicing entire business operations teams. We think Wipro merits a narrow economic moat rating, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company will likely struggle amid the COVID-19 pandemic, we think its stable moat trend will stay secure. Forays into the higher-value realm of industrial engineering will help ensure that Wipro does not miss out on substantial growth trends in the overall IT services industry.