Cognizant declines as J.P. Morgan downgrades following bookings drop, soft guidance
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Cognizant Technology (NASDAQ:CTSH) shares fell on Thursday as investment firm J.P. Morgan downgraded the IT consulting technology firm after it said bookings fell in the second quarter and offered weak guidance.
Analyst Tien-Tsin Huang lowered the firm's rating on Cognizant Technology (CTSH) shares to neutral from overweight, while cutting the price target to $77, noting that the firm has become "more cautious," citing elevated attrition.
"We are more cautious on revenue production given elevated attrition, making it more difficult to capture client demand, as well as necessary price increases to offset inflation, which could aggravate if demand deteriorates," Huang wrote in a note to clients.
Cognizant Technology (CTSH) shares fell more than 5% to $66.69 in mid-day trading.
In addition, Huang noted that the company is not seeing any slowdown in demand for IT services, but bookings fell 3%, short of expectations.
Financial Services revenue growth was lowered by 1% to 9% and it's possible the firm could achieve this target, but with the macro uncertainty, that "seems more difficult," Huang explained.
In addition to the weak results and guidance, Cognizant Technology (CTSH) repurchased worth $300M shares during the quarter, leaving $1.4B under the existing buyback program.
Analysts are largely positive on Cognizant Technology (CTSH). It had an average rating of BUY from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates CTSH a HOLD.