Bank of America Merrill Lynch Reinstates Buy Rating, $70 PT on Cognizant Technology Solutions
In a report published Monday, Bank of America reinstated a Buy rating and $70.00 price objective on Cognizant Technology Solutions (NASDAQ: CTSH).
Bank of America noted, “Over the last five years, Cognizant has grown EPS at a 30% CAGR, well above peers' mid-teens growth. CTSH limits its non-GAAP operating margin to 19-20% and re-invests for growth more heavily than peers. Less than half of CTSH's revenue comes from discretionary projects. In 2009, sales growth slowed to as low as 13% YoY. Pressures at financial firms are delaying new projects. With 1Q12 results, management lowered 2012 revenue guidance from >23% YoY to >20% YoY. We argue CTSH has a long runway of growth. CTSH has <1% market share and global delivery models offer 30-50% cost savings. We have some concerns about saturation and commoditization in application development and maintenance.”
Cognizant Technology Solutions closed on Friday at $57.26.
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