Ambit Capital upgrades Cognizant stock rating to Buy on improving growth

Investing.com - Ambit Capital upgraded Cognizant Technology Solutions (NASDAQ:CTSH) from Sell to Buy, while slightly lowering its price target to $82.00 from $84.00. The upgrade comes as 13 analysts have revised their earnings upwards for the upcoming period, according to InvestingPro data.

The research firm cited Cognizant’s improving growth trajectory, noting that the company’s performance is now comparable or better than its tier-1 peers after previously underperforming in key sectors like BFSI and Healthcare, which represent 60% of the company’s revenue. The $33.5B market cap company has maintained a solid 6.34% revenue growth over the last twelve months.

Ambit Capital highlighted several operational improvements at Cognizant, including attrition rates now comparable to peers, enhanced operational efficiencies through SG&A rationalization, increased offshoring, reduced client churn, and improved capabilities in SaaS and ER&D.

The firm considers Cognizant stock "cheap to play optionality" at 12.7x CY26E P/E, with current market price implying a 3.3% USD revenue CAGR over CY24-34, noting the stock has delivered no returns in five years.

Ambit Capital indicated that Cognizant still has leeway to invest as SG&A and offshoring scope remains, though it prefers Tech Mahindra (which it also rates as Buy) over Cognizant.

In other recent news, Cognizant Technology Solutions reported strong earnings for Q2 2025, surpassing analyst expectations. The company achieved an earnings per share of $1.31, which was above the projected $1.26. Revenue also exceeded forecasts, reaching $5.25 billion compared to the anticipated $5.18 billion. Despite these positive financial results, BMO Capital has adjusted its price target for Cognizant, lowering it to $84 from the previous $85, while maintaining a Market Perform rating. The firm highlighted Cognizant’s solid performance, noting strong bookings and high single-digit Annual Contract Value growth. Additionally, Cognizant has entered into a strategic partnership with the North Carolina Turnpike Authority to develop a next-generation tolling back-office system. This initiative aims to integrate with partners like Mastercard and Volvo Car USA, allowing drivers to pay tolls directly through Volvo’s infotainment system. These developments reflect Cognizant’s ongoing efforts to innovate and expand its technological capabilities.

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