Cognizant Gains 6% in the Past Month: Should Investors Buy the Stock?

Core Viewpoint - Cognizant Technology Solutions (CTSH) is experiencing positive momentum driven by expanding clientele, strong partnerships, and robust financial performance in Q3 2024, with a focus on AI and cybersecurity solutions [1][2][7]. Financial Performance - In Q3 2024, Cognizant reported revenues of $5 billion, reflecting a 3.5% sequential growth in constant currency and a 2.7% year-over-year growth, supported by strong demand in health sciences and financial services [2]. - Health Sciences revenue increased by 7.6% year-over-year in constant currency, while Financial Services saw a slight growth of 0.5% in constant currency and 0.7% year-over-year [2][3]. Strategic Partnerships - Cognizant's expanding partner base includes notable companies like NVIDIA, ServiceNow, and Palo Alto Networks, with six deals exceeding $100 million signed in Q3 2024, totaling 19 large deals year-to-date [4][5]. - A new collaboration with NVIDIA aims to enhance data modernization offerings, while the partnership with ServiceNow focuses on unifying business and technology data for AI applications [5][6]. AI and Cybersecurity Initiatives - The company is investing $1 billion in AI to enhance its platforms and capabilities, with significant progress in AI and automation through various initiatives [7][8]. - The launch of Cognizant Neuro Cybersecurity aims to improve cybersecurity resilience by integrating various solutions for better decision-making and threat management [9]. Acquisitions Impact - Recent acquisitions, including Belcan, contributed approximately 150 basis points to revenue growth in Q3 2024, enhancing Cognizant's presence in aerospace and defense [10]. Future Guidance - For Q4 2024, Cognizant expects revenues between $5 billion and $5.1 billion, indicating growth of 5.1-7.1%, with a consensus estimate of $5.07 billion [11]. - For the full year 2024, revenues are projected to be in the range of $19.7-$19.8 billion, reflecting an increase of 1.6-2.1% on a reported basis [12]. - Adjusted earnings per share for 2024 are expected to be between $4.63 and $4.67, with a consensus mark of $4.66 per share, indicating a year-over-year increase of 2.42% [13]. Valuation Metrics - Cognizant's shares are considered undervalued with a Value Score of B, and the forward 12-month Price/Sales ratio stands at 2.03, lower than the industry's 12.16 [14][15].