Wipro's Q3 Misses Revenue, Gradual Improvements Underway; Lowering FVE, but Shares Are Still a Buy

Narrow-moat Wipro took a turn from other IT services that reported earlier this week by missing on revenue—whereas both Tata Consultancy Services and Infosys posted top-line beats. Still, bookings are strong and profitability is gradually rising after absorbing salary increases. We are modestly lowering our fair value estimate for the IT services firm to INR 450 ($5.40) from INR 460 ($5.50) per share to factor in the revenue miss and its implication for the future. However, with shares down 1% upon results, Wipro remains in 4-star, attractive territory. We believe the market is overly harsh on the stock, as our fair value estimate already implies conservative results—including significantly lower margins than its peers over the next five years.