Largecap IT Stock Wipro Drops As Much As 9% On Weak Q1 Results, Brokerage Downgrades; Should You Buy?

The shares of Bengaluru-based IT giant Wipro Ltd. plunged 7.5% on Monday morning, marking a sharp drop in response to its latest quarterly earnings report, released after market hours on Friday. This decline came on the back of an even more dramatic 11.5% drop in its US-listed American Depository Receipts (ADRs) on Friday night.

Wipro's June quarter results revealed a concerning trend as the company's constant currency revenue decreased for the sixth consecutive quarter. The 1% decline was a contrast to market expectations, which had anticipated flat revenue growth. This ongoing revenue contraction has raised alarm among investors and analysts alike.

Looking ahead, Wipro has provided a cautious forecast for the September quarter, projecting revenue growth in constant currency terms to range between -1% and 1%. This forward guidance further fueled concerns about the company's near-term performance.

The reaction from analysts has been notably bearish. Of the 44 analysts covering Wipro, 23 have rated the stock as a "sell" or its equivalent. Twelve analysts recommend a "hold," while only nine have a "buy" rating. This mixed but predominantly negative sentiment reflects the growing unease surrounding Wipro's financial health and operational challenges.

Interestingly, Wipro had recently enjoyed a flurry of positive upgrades, including a notable double-upgrade from CLSA earlier this month. This optimism now seems to have been short-lived, with the stock trading down over 9% at Rs 506.40 per share on the National Stock Exchange (NSE) as of 3 pm today.

Despite this significant drop, Wipro's stock has had a strong performance over the past year, delivering returns of nearly 40%. However, the recent plunge has eroded half of the gains achieved just last month. The stock is still up 8% year-to-date for 2024, but Monday's nosedive marks the largest single-day drop since March 2020.