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Oppenheimer Lowers PT On Cognizant Technology (CTSH) To $72, Reiterates 'Outperform'

 May 08, 2012 10:10 AM

(By Balachander) Oppenheimer & Co. Inc. lowered its price target on shares of Cognizant Technology Solutions Corp. (NASDAQ:CTSH) to $72 from $82, while reiterating "Outperform" rating on the stock.

The brokerage noted that CTSH's 1Q12 results were directionally consistent with industry trends, which began the year slowly. Demand from large US banks and pharma is ramping more slowly than expected, which caused CTSH to lower its CY12 guidance to "at least 20 percent" revenue growth.

"We remain confident in CTSH's intermediate/long-term growth outlook, and still expect CTSH to grow almost 2x the industry during FY12. While the company's reduced expectations are disappointing, we are not entirely surprised given peer trends/commentary," Oppenheimer wrote in a note.

[Related -Cognizant Technology Solutions Corp (CTSH): How Penetration Rates Are Faring?]

Oppenheimer said it remains attracted to CTSH's strong track record of industry-leading revenue growth. However, the revised FY12 outlook and peer commentary suggest shortterm industry-wide challenges.

"That said, with shares trading at 14x our revised FY13 estimate and with its over $8/share in cash/investments, we believe CTSH is very attractive and would be aggressive buyers on weakness," the brokerage wrote.

CTSH participates in a large and rapidly growing market, and in our view, is well positioned to benefit from the worldwide increase in offshoring. The brokerage is of the view that offshoring services are gaining share of the broad IT Services market, and Cognizant, with its North American heritage and customer-centric focus, has a competitive advantage relative to its offshore peers.

[Related -Cognizant Technology Solutions Corp (CTSH): How Q3 Earnings Will Fare?]

Oppenheimer lowered its FY12 EPS estimate for CTSH to $3.36 from $3.45 and FY13 EPS estimate to $3.92 from $4.13.

On Tuesday, the stock jumped 5.7 percent to trade at $59.55. Over the past year, shares have been trading between $53.54 and $78.75.



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