Cognizant rises even as BofA downgrades on rivals' slowing growth
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Cognizant Technologies (NASDAQ:CTSH) shares rose fractionally in early trading on Monday even though Bank of America downgraded the IT services company due to slowing growth among its competitors.
Analyst Jason Kupferberg lowered his rating on Cognizant Technologies (CTSH) shares to underperform from neutral, and noted that Accenture's (ACN) recent report "illustrates that even IT Services industry leaders are feeling some pinch from the tougher macro [economic environment]."
Kupferberg said that revenue growth from Cognizant (CTSH) has lagged its competitors "for some time," so it's likely that a weakening economic environment would hurt the company more than its peers. In addition, Kupferberg also noted that bookings have been softer than expected in the year to date, and with a tough comparison coming up when it reports fourth-quarter results, the risks are heightened for Cognizant (CTSH).
"If downward revenue estimate revisions are not yet over, we think multiple expansion would be challenging," Kupferberg said, in a research note, adding that such a situation could lead to Cognizant (CTSH) shares lagging those of the company's peers.
Last month, J.P. Morgan downgraded Cognizant (CTSH) to underweight, also noting the weak macro environment.
Analysts are largely cautious on Cognizant Technologies (CTSH). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a HOLD. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates CTSH a HOLD.