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Investing.com - Evercore ISI initiated coverage on Cognizant Technology Solutions (NASDAQ:CTSH), a $36.9 billion IT services giant, with an Outperform rating and a $100 price target on Thursday. According to InvestingPro data, the stock trades at a P/E ratio of 15.7x, with analysts’ targets ranging from $80 to $103.
The research firm cited Cognizant’s potential to "sustainably return to the winner’s circle" with top-tier industry growth, driven by momentum in large deals, including at least three mega deals exceeding $500 million, along with AI tailwinds and improving trends in key markets. The company has demonstrated solid performance with $20.1 billion in revenue over the last twelve months and a healthy 34.3% gross profit margin.
Evercore ISI highlighted that Cognizant is the "first/only systems integrator" to quantify AI-generated software code at 20%, a figure the firm expects to increase. The company’s deep domain expertise, particularly in healthcare where its Trizetto platform covers approximately two-thirds of the U.S. insured population, was identified as a key differentiator. InvestingPro analysis reveals the company’s strong financial health with a "GOOD" overall rating, supported by robust cash flows and moderate debt levels.
The firm projects Cognizant can achieve consistent mid to high single-digit organic growth, approximately 50 basis points of annual margin expansion, and double-digit EPS/FCF growth over the next several years, potentially reaching "$6.50 of EPS power" in a medium-term upside scenario.
Evercore ISI also noted Cognizant’s strong free cash flow conversion at nearly 100% of net income and its shareholder-friendly capital allocation strategy, which includes dividends (25%), share repurchases (25%), and value-add M&A (50%), while trading at a discount to its historical average.
In other recent news, Cognizant Technology Solutions reported a strong first quarter, surpassing both peer and Wall Street expectations. JPMorgan analysts upgraded the company’s stock rating from Neutral to Overweight, raising the price target to $98, citing Cognizant’s improved operational performance and strategic positioning. In contrast, BMO Capital Markets maintained its Market Perform rating but lowered the price target to $85 due to concerns about a potential slowdown in organic growth. Cognizant has also expanded its partnership with Salesforce (NYSE:CRM), introducing new services on Salesforce’s Agentforce platform, aimed at integrating AI agents into enterprise workflows. The company announced the launch of Agent Foundry, a platform designed to help businesses deploy AI agents at scale, supporting multiple technology platforms and ensuring compliance with regulations. In executive news, Robert Telesmanic, Senior Vice President and Chief Accounting Officer, will retire in July 2025, with Alina Kerdman set to succeed him. Kerdman’s appointment aligns with Cognizant’s ongoing management transitions. These developments reflect Cognizant’s efforts to enhance its service offerings and maintain strong leadership as it navigates the evolving tech landscape.
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