What’s Happening with Cognizant Stock?
Cognizant Technology Solutions Corp (NASDAQ:CTSH) saw its stock surge by eight percent after the Elliot Management Corporation hedge fund released an open letter calling out Cognizant stock as being woefully behind where it should be.
“Despite this leading position,” the letter stated, “Cognizant’s stock price performance tells the story of deep underperformance across all relevant benchmarks, including its closest peers, over all time periods during the last five years.” (Source: “Letter to Cognizant Technology Solutions Corporation Board,” Elliott Management Corporation, November 28, 2016.)
According to the letter, Elliot believes that Cognizant stock can achieve a value of $80.00–$90.00-plus per share by the end of 2017, which would be a 50%-69% jump in just over a year.
The letter detailed out-of-date management and sales tactics as some of the key factors as to why the stock hasn’t met expectations, as well as Cognizant’s inability to efficiently adapt to its position as a market leader in IT solutions.
The letter went on to say that Cognizant stock operations and capital allocation strategies are “remnants of its history as a nascent industry ‘challenger’ that invested at all costs to gain share,” and not in keeping with a strategy that reflected its position as an industry leader.
“In addition, Cognizant’s relative valuation illustrates a profound loss of confidence amongst the shareholder base,” the letter reads.
The long and short of it is that Elliot sees Cognizant stock as behind the times, and that, due to the latter’s outdated way of operating, it’s not making as much money as it should be.
Elliot has experience pulling these types of revitalizations before, however. That’s probably why the stock jumped as high as it did when the company projected the gains that it sees Cognizant stock as potentially being able to achieve. (Source: “This Is Why Cognizant Technology Stock is Surging Today,” Income Investors, November 28, 2016.)
The letter also called for a meeting of the board so that Elliot could present its findings on how the hedge fund sees Cognizant moving forward. For now, though, investors are gobbling up Cognizant stock with renewed abandon.
Editor’s Note: Hi, Stephen Karmazyn here. If you enjoyed this article, you can get more of my opinions and commentaries in our popular daily tech letter, Profit Confidential. Published daily, it’s FREE! Join us when you click here now.