Barclay’s Upgrades Cognizant

Via Barron’s. Barclays raises their target on Cognizant ($CTSH) from $80 to $97.

Over the past two quarters, Cognizant has demonstrated solid fundamentals, and we see accelerating trends in 1) Europe, with both consulting and outsourcing showing a pickup; 2) health care, which we expect to improve on stronger payer trends; and 3) financial services, with sustainable growth in upper teens. In addition, with what now appears to be a delay in the U.S. immigration bill, Cognizant [which receives a large number of H-1B temporary worker visas to bring tech workers into the U.S.] should see its overhang of legislative uncertainty subside. Combining that with solid fundamentals trends, near-term catalysts on the horizon, and attractive valuation, we are upgrading CTSH shares from Equal Weight to Overweight.

With the shares up ~10% year to date, versus the Standard & Poor’s 500 (up ~20%), and trading at only a ~2 times price/earnings premium over the S&P, versus a two-year average premium of ~five times, we believe CTSH remains undervalued, despite the recent increase from the mid-60s to ~$80. Applying a ~17-times multiplier to our 2015 estimate, we raise our price target from $80 to $97.

Posted by on September 21st, 2013 at 8:33 pm


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