Nomura Securities Downgrades Cognizant Technology Solutions (CTSH) to Neutral

August 8, 2016 7:38 AM EDT
Get Alerts CTSH Hot Sheet
Price: $56.65 -1.24%

Rating Summary:
    21 Buy, 11 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 23 | Down: 34 | New: 34
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Nomura Securities downgraded Cognizant Technology Solutions (NASDAQ: CTSH) from Buy to Neutral with a price target of $62.00 (from $65.00).

Analyst Ashwin Mehta commented, "CTSH cut its FY16F revenue growth guidance for the second time in two quarters to 8.5-9.5% (vs 10-14% in 1Q and 10-13% in 2Q), citing: 1) pullback in discretionary spend, Brexit impacts and pressure at banks/insurance clients amid the low interest regime; 2) slowdown in healthcare demand due to a lull in activity ahead of pending large M&As; and 3) demand issues at a handful of clients in other verticals. Stock upside appears limited given: 1) issues in 70% of the business (BFSI + healthcare), 2) weak 4QFY16 exit growth of ~9% y-y, which is likely to limit outperformance in FY16F and material acceleration in FY17F, and 3) the stock looks fairly valued at 18.4x FY17F EPS for FY15-17F revenue/EPS CAGRs of 10%/11%, with the growth gap vs peers narrowing. We believe the case for a material premium to Indian IT peers is weakening as growth converges with lower margins/return ratios and cash returns."

For an analyst ratings summary and ratings history on Cognizant Technology Solutions click here. For more ratings news on Cognizant Technology Solutions click here.

Shares of Cognizant Technology Solutions closed at $59.71 yesterday.

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