Market Overview

BMO Capital Markets Upgrades Cognizant On CEO Change

Share:
BMO Capital Markets Upgrades Cognizant On CEO Change

Cognizant Technology Solutions Corp (NASDAQ: CTSH) has historically sacrificed revenue growth for margin expansion, although revenue growth typically has a bigger impact on multiples than margin expansion, according to BMO Capital Markets. 

The sell-side firm finds it encouraging that the IT company is targeting modest margin expansion in 2020 and beyond, with expectations that it should drive long-term shareholder value. 

The Analyst

Analyst Keith Bachman upgraded Cognizant Technology Solutions from Market Perform to Outperform and lifted the price target from $80 to $88.

The Thesis

The appointment of Brian Humphries as Cognizant’s CEO is a good decision, Bachman said in the Wednesday upgrade note.

Humphries is an “excellent addition," and the new management is likely to optimize for revenue growth, the analyst said. 

Cognizant issued FY19 revenue growth guidance of 7-9 percent, which missed consensus expectations. Humphries is likely to focus on Cognizant consistently achieving or exceeding investor expectations and could provide revised guidance that may well be lower than current projections, Bachman said. 

More realistic margin targets in FY20 will enable Cognizant to focus on growing its topline more than it has in recent years, the analyst said. 

The journey to creating meaningful shareholder value is unlikely to be smooth, Bachman said, adding that meeting expectations will drive the stock higher. 

Price Action

Cognizant shares were down 2.23 percent at $72.84 at the time of publication Thursday. 

Related Link:

Zendesk's Momentum Should Continue In 2019, Oppenheimer Says 

Earnings Scheduled For February 7, 2019

Latest Ratings for CTSH

DateFirmActionFromTo
Aug 2019DowngradesNeutralSell
Jul 2019DowngradesBuyHold
May 2019DowngradesBuyHold

View More Analyst Ratings for CTSH
View the Latest Analyst Ratings

Posted-In: BMO Capital Markets ITAnalyst Color News Upgrades Price Target Management Analyst Ratings Best of Benzinga

 

Related Articles (CTSH)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
LOWRBC CapitalMaintains129.0
MARRBC CapitalMaintains148.0
CRLSunTrust Robinson HumphreyMaintains162.0
CFRSunTrust Robinson HumphreyMaintains105.0
ZYNEJefferiesAssumes11.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Zynga's Big Quarter: Analysts Speak Up

Getting Trucked Around: Seized Hemp Case Raises Concerns About Legality And Jeopardy