Wipro share buyback, target prices: What Jefferies, Morgan Stanley, others say after soft Q1 guidance

Shares of Wipro Ltd may see some weakness on Friday, tracking an overnight 4.85 per cent drop in its American Depositary Receipt (ADR) overnight, as the IT major’s June quarter guidance was underwhelming. A decline in top clients and weakness in the US BFSI segment are seen hurting near-term growth. Margins are also expected to come under pressure in the near term due to investments and deal ramp-ups.

Wipro has guided for a minus 2 per cent to nil sequential constant currency (CC) revenue growth for the June quarter. During the press meet, the management assumed that the recent large deals and acquisitions will contribute for half the quarter at the m deidpoint, implying that organic business will likely de-grow in the first quarter, Jefferies in a First Cut note said. 

The management cited account-specific issues in Americas region and delays in large deal ramp-up for this weakness. "Wipro's total bookings in 4Q declined by 11 per cent YoY CC, driven by a 20 per cent YoY decline in large deal bookings. Non-large deal bookings declined 15 per cent YoY, a reflection of continued pressures of discretionary IT spends," the foreign brokerage said.

On share buyback, Jefferies said Wipro has announced a buyback of Rs 15,000 crore at Rs 250 per share. The buyback price is at a 19 per cent premium to CMP, broadly in line with the previous few buybacks. This is in addition to dividend payout of Rs 11 per share made over FY26. For now, Jefferies suggested a target of Rs 180 for the stock. 

MOFSL said while management expects normalisation from Q2, it said near-term visibility remains limited due to ramp-up delays and seasonality. It said the timely execution of the deals will be key to improving growth visibility. ". We believe that broad-based growth across verticals and a stable conversion of deal TCV to revenue will be key to a constructive view. We reiterate our Neutral rating on WPRO with a TP of INR215, implying 14x FY28E EPS," MOFSL said.

Nuvama Institutional Equities said Wipro is likely to start FY27 on a soft note. However, the margin remains solid and valuation highly attractive at 15 times FY27 PE. It retained ‘Buy’, as inexpensive valuation and sizeable buyback make it attractive at current levels.

"We upgrade our FY27E/28E estimates (up 6.8 per cent/up 5 per cent) on lower share count (due to buyback) and higher USD-INR assumption (93 versus 88 earlier). We continue to value Wipro at 18 times FY28E with a target price of Rs 255 (earlier Rs 240). Maintain ‘BUY’," Nuvama said.

Morgan Stanley has reportedly maintained Underweight on the Wipro stock with a reduced target of Rs 192 from Rs 242.