Tuesday - Mizuho has revised the price target for EPAM Systems (NYSE:EPAM) to $258 from the previous $345, while maintaining a Buy rating on the stock. The adjustment follows EPAM's recent announcement of its first-quarter results for 2024 and a reduction in its revenue forecast for the year.
The IT services provider now expects a decrease in year-over-year revenue growth, estimating a 1.4% decline compared to the previously anticipated 2.5% growth. This revision has led to a significant 27% drop in EPAM's stock price.
The lowered revenue guidance is attributed to the ongoing challenges within the broader IT services market, rather than issues specific to EPAM. Despite the setback, Mizuho views EPAM's valuation, at approximately 16.5 times its adjusted earnings per share for 2025, as attractive.
The firm suggests that the recent decline in EPAM's stock price presents a buying opportunity, noting that the company is now trading at roughly a 14% discount to the S&P 500 index. This is a notable shift from its typical 50% premium over the historical average.
Mizuho's analysis includes three key perspectives. First, they have adjusted their earnings estimates for EPAM to reflect a slower recovery in revenue than initially forecasted. Second, the valuation multiple applied to EPAM has been modified, leading to the reduced price target.
Lastly, despite the lowered expectations, Mizhuo reaffirms its Buy rating, indicating a continued positive outlook for EPAM's stock in the long term. The firm's stance remains optimistic, suggesting that the current market conditions offer an advantageous entry point for investors interested in EPAM Systems.
InvestingPro Insights
Recent data from InvestingPro provides a detailed financial perspective on EPAM Systems (NYSE:EPAM) that aligns with Mizuho's revised outlook. The company holds a market capitalization of $11.06 billion, with a P/E ratio adjusted for the last twelve months as of Q1 2024 at 21.98, suggesting a potentially favorable valuation given the current market conditions. Despite a challenging quarter with a revenue decline of 4.5%, EPAM's gross profit margin remains robust at 30.6%, reflecting its ability to maintain profitability in a tough market. The stock's recent performance indicates that it is trading near its 52-week low, with a price 60.05% of its 52-week high, which could be an attractive entry point for investors, in line with Mizuho's assessment.
Among the InvestingPro Tips, two are particularly relevant to the article's discussion. Firstly, EPAM holds more cash than debt on its balance sheet, which is a positive sign of financial stability in uncertain times. Secondly, the stock's Relative Strength Index (RSI) suggests it is in oversold territory, which could indicate a potential rebound. For investors seeking a comprehensive analysis, InvestingPro offers an additional 11 tips on EPAM Systems, which can be explored in detail by visiting https://www.investing.com/pro/EPAM. To access these insights, readers can use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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