What made Wipro touch one year lows? Let's find out!

The IT stocks continue to see selling pressure this year. The NIFTY IT index has fallen over 18% in the last one year. Index heavyweights like Infosys shares are down around 23%, while TCS shares have fallen nearly 12.5%. However, Wipro's share price has fallen over 37% in the same period. What is leading to the fall in share price? We will look at the details in this article.

Wipro Share Price

Why is Wipro's share price falling?

Wipro's share has been the worst-performing share among Tier 1 IT companies. Below are some reasons for Wipro's share falling price:

• Geopolitical risks: Like other IT companies, geopolitical risks are one of the prime reasons for the fall in Wipro's share price. Wipro earns about 90% of its revenue from the US and Europe. Any political or economic risks in these regions will impact the company's business.
• Gross margins are down: Wipro has made many acquisitions in recent years which have affected the company's gross margins. If you look at its last eight quarters' margins - you will notice a decline of over 600 bps which is impacting the company's share price. Acquisitions like Capco and Rizing have led to a big reset at gross margin levels.
• Consulting business not doing well: Wipro management has already mentioned that the consulting business will not perform well in the December quarter due to geopolitical tension and macro uncertainty. The challenges in Europe - wage hikes, travel, and acquisitions costs are denting Wipro's margins. It would be reflected in the upcoming quarterly results. The market is factoring that in - the reason for the recent fall.
• Weak results: Another reason for the recent fall in Wipro share price is its weak results for the Oct-Dec 22 period. The IT major reported a rise of just 2.8% from the previous year to Rs 3,052.9 crore. Although revenues witnessed a yearly rise of 14.4% to Rs 23,229 crore, it came in lower than the analyst estimate of Rs Rs 23,436 crore.

What should investors do having Wipro's share?

Below are some updates from analysts' on Wipro's share:

ICICI Direct: The top domestic brokerage has a Buy rating on the stock with a price target of Rs 455. The firm cited large deal wins in recent times and key leadership changes that can be primary drivers for the growth in the Wipro share price in the future.

Motilal Oswal: The renowned brokerage has a Neutral rating on the stock with a price target of Rs 380. The firm cited a mismatch between the order book and profit growth as key concerns for the Wipro share. However, strong growth in margins remains a strength for the company.

BNP Paribas: The global brokerage has a Hold rating on the stock with a price target of Rs 420. A large order book and the company's declining attrition rate has been cited as strengths by the firm. However, slow revenue growth remains a cause of concern for the company.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.