Cognizant Earnings: Improved Profitability Buttresses Results as Customer Spending Remains Muted

We are maintaining our $94 fair value estimate for narrow-moat Cognizant after the firm kicked off fiscal 2024 with a set of strong financial results marked by impressive profitability despite the tough macro conditions. Over the last few quarters, Cognizant and its IT services peers have seen a marked slowdown in discretionary customer spending amid a generally tight macro environment. Investors have homed in on this near-term weakness, dealing overly punitive damage to Cognizant's valuation. With an eye on the long term, we continue to view Cognizant as a moaty IT service vendor with a strong growth and margin profile. Despite shares trading up afterhours, we continue to view Cognizant as materially undervalued and trading in the 5-star territory.