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Cognizant Technology Solutions Corp Class A CTSH

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Morningstar’s Analysis

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Cognizant’s Investor Day Provides Market-Share Gaining Revenue Guide; Now’s the Time to Buy

Julie Bhusal Sharma Equity Analyst

Analyst Note

| Julie Bhusal Sharma |

On Nov. 18, narrow-moat Cognizant hosted its investor briefing, which reiterated Cognizant’s strategy of getting back on track to healthier growth from hiccups over the last few years--which included losing several bank clients and slower transitions to digital transformation offerings. Cognizant’s confidence led to an impressive top-line CAGR between 8% and 11% between 2022 and 2024 (2 points of which is expected to be inorganic), as the industry is expected to grow at a 7% to 8% CAGR over that period, implying market share gains for Cognizant. While we’ve updated our model to include such a CAGR from 2022 to 2024 on the lower end of that guide, due to cautiousness as the company tries to right its past wrongs, this still raises our fair value estimate significantly to $95 per share from $76 per share. As a result, Cognizant is now in 4-star territory--making the stock attractively priced for investors--especially those wanting more exposure to digital transformation.

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Company Profile

Business Description

Cognizant is a global IT services provider, offering consulting and outsourcing services to some of the world’s largest enterprises spanning the financial services, media and communications, healthcare, natural resources, and consumer products industries. Cognizant employs nearly 300,000 people globally, roughly 70% of whom are in India, although the company’s headquarters are in Teaneck, New Jersey.

300 Frank W. Burr Boulevard, Suite 36, 6th Floor
Teaneck, NJ, 07666
T +1 201 801-0233
Sector Technology
Industry Information Technology Services
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Slow Growth
Employees 318,400