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On Thursday, Jefferies maintained a Buy rating on Cognizant Technology Solutions (NASDAQ:CTSH) stock and increased the price target to $100 from $90. The adjustment followed Cognizant’s fourth-quarter results, which surpassed expectations. The firm noted that the company’s revenue guidance for 2025 seemed slightly conservative. With a current market capitalization of $41.45 billion and trading near its 52-week high of $83.97, InvestingPro analysis suggests the stock is currently undervalued based on its Fair Value model.
Cognizant’s fourth quarter showcased another period of strong bookings and included 10 significant deal wins. These developments are expected to support a higher growth rate for the company’s Outsourcing services in 2025. Management highlighted that discretionary spending showed sequential improvement in the fourth quarter, evidenced by a rise in Annual Contract Value (ACV) from the previous quarter. The company maintains a strong financial position, with InvestingPro data showing a healthy current ratio of 2.23 and moderate debt levels.
Despite the positive momentum, Jefferies adjusted their revenue estimate downwards. Nonetheless, the firm’s adjusted earnings per share (EPS) estimate for 2025 remains steady at $5.00. The analyst’s commentary underscored the potential for continued growth, underpinning the decision to reiterate the Buy rating.
The revised price target reflects Jefferies’ confidence in Cognizant’s ability to sustain growth and capitalize on its recent large deal wins. The firm’s unchanged EPS forecast, despite the slight reduction in revenue expectations, suggests a belief in the company’s operational efficiency and profit potential moving forward.
As the market responds to these insights, investors will be watching Cognizant’s performance closely to see if the growth in Outsourcing and the increase in ACV translate into long-term financial success, in line with Jefferies’ projections.
In other recent news, Cognizant Technology Solutions has been making waves with its strong Q4 results and an influx of new deals. The IT services company reported adjusted earnings per share of $1.21 for Q4, surpassing analyst consensus of $1.12. Revenue came in at $5.08 billion, aligning with estimates and marking a 6.8% YoY increase. Additionally, Cognizant secured 10 new large deals during the quarter, and bookings saw an 11% year-over-year increase, indicating potential for growth in fiscal year 2025.
However, despite these achievements, the company’s 2025 guidance presents a conservative outlook. For the first quarter of 2025, Cognizant expects revenue between $5.0 billion and $5.1 billion, with the midpoint of this range slightly below the $5.07 billion analyst consensus. The company forecasts full-year 2025 revenue of $20.3 billion to $20.8 billion, falling short of the $20.86 billion analysts were expecting.
Needham analyst, Mayank Tandon, has maintained a Hold rating on Cognizant’s stock, citing the company’s growth trajectory, which lags behind the industry average, and a valuation of approximately 15 times the ex-cash fiscal year 2026 price-to-earnings multiple. Needham suggests the stock is currently fairly valued, given these factors. Despite the positive indicators from the past quarter, the tempered revenue outlook for the upcoming periods has necessitated a cautious approach from analysts.
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