Nuvama raises Wipro to ‘Buy,’ expects 20% growth

Industry analysts have upgraded Wipro to 'Buy' from 'Hold,' raising its target price to ₹700 from ₹520. This move reflects confidence in the company's revitalised leadership under CEO Srini Pallia, improved portfolio mix, and attractive valuations. The target suggests a potential upside of 20% from its previous close, making it an appealing option for investors.

Wipro's performance and valuation

At 11:10 AM, Wipro's shares traded 1.6% lower at ₹573, though the stock has risen 20% year-to-date, outperforming the Nifty 50's 11% gain. Monthly gains since June 2024 further underscore its recovery. Analysts attribute this to attractive valuations and an improving market landscape, positioning Wipro as a solid choice for those planning to invest in stocks.

Discretionary spending revival expected to boost growth

Discretionary spending, accounting for 60–65% of Wipro’s revenue, has faced headwinds in recent quarters. However, industry experts predict this trend will reverse, especially after the U.S. Federal Reserve cut its interest rate in September 2024. This recovery in spending is likely to benefit Wipro, strengthening its appeal to investors seeking opportunities to invest in stocks.

BFSI and consulting segment show promise

Wipro’s consulting arm, Capco, has reported growth for two consecutive quarters. Positive commentary from peers like Accenture validates this recovery. Additionally, its significant presence in the BFSI sector, which contributes 34% of revenue, is poised for growth due to increased tech spending by financial institutions. Industry-wide optimism suggests Wipro will capitalise better on these trends than its peers.

Leadership changes spark optimism

The appointment of Srini Pallia as CEO in April 2024 has reinvigorated Wipro. His focus on maintaining margins above 16% and aligning with industry growth has boosted morale and investor confidence. Analysts consider this leadership transition a critical factor in the company’s turnaround, further solidifying its position as a prime candidate for those aiming to invest in stocks.

Key financial highlights

For Q2 FY25, Wipro’s consolidated net profit rose 7% quarter-on-quarter to ₹3,209 crore, surpassing estimates. Revenue from operations increased by 1.5% to ₹22,302 crore, exceeding projections. However, its IT Services revenue guidance for the December quarter has been revised slightly downward, reflecting cautious optimism.

Key takeaways

1. Wipro upgraded to 'Buy,' with a target price of ₹700, offering a 20% upside.
2. Revival in discretionary spending and BFSI growth could boost revenues.
3. Leadership changes and strong consulting performance fuel optimism.
4. Attractive valuations make Wipro a compelling option to invest in stocks.