Cognizant Faces Strong Headwinds and Stronger Demand in the First Quarter; Shares Attractive

Cognizant kicked off the year with decent first-quarter results ahead of FactSet consensus on the top line, however, bottom-line results came in short of expectations. Despite persistent challenges arising from talent shortages within the IT services industry, we remain impressed with Cognizant’s ability to expand its top line and shrink voluntary attrition rates over the quarter. While management has provided a conservative outlook for 2022, we believe elevated demand for Cognizant’s digital transformation services will continue to drive growth and offset the near-term headwinds. Furthermore, Cognizant’s acceleration of international revenue and bookings growth is promising. With this, we maintain our fair value estimate for narrow-moat Cognizant at $102 per share and view the stock as attractive.