On Tuesday, EPAM Systems, Inc. (NYSE:EPAM) received an upgrade in its stock rating from Jefferies, moving from Hold to Buy. The firm has also increased its price target for EPAM shares to $237 from the previous target of $202. The upgrade is based on the anticipation that artificial intelligence (AI) will serve as a significant catalyst for the company's growth.
EPAM Systems is recognized for its ability to execute complex systems engineering projects and is considered to be at the forefront of technological innovation. The firm's expertise in subject matter and its pool of strong engineering talent are seen as key factors that will position it to benefit greatly from the emergence of Generation AI (Gen-AI). Jefferies projects that Gen-AI could add an incremental 500 to 1,000 basis points to EPAM's annual organic growth rate in the next 3 to 5 years.
While significant revenue contributions from Gen-AI are not expected until the second half of 2025 or potentially 2026/2027, Jefferies believes that the demand for IT services is showing signs of reaching a trough.
The firm posits that, barring any major downturns in the global economy, demand is unlikely to decrease further, which minimizes the downside risk for EPAM's stock at its current levels. This outlook has prompted the firm to take an optimistic stance on EPAM's stock earlier than the anticipated demand normalization, which is estimated to occur around 2026.
In other recent news, EPAM Systems has undergone significant changes in its operations and market analysis. The company recently acquired Odysseus Data Services, a strategic move aimed at enhancing its capacity in the life sciences sector by integrating advanced data analytics and artificial intelligence. This development is expected to drive innovation and improve outcomes in the life sciences domain.
In terms of analyst ratings, Goldman Sachs (NYSE:GS) initiated coverage on EPAM Systems with a Neutral rating and a price target of $200, while Piper Sandler maintained an Overweight rating on EPAM's stock despite a revised price target of $230.
Conversely, Wolfe Research downgraded EPAM Systems from Outperform to Peer Perform due to macroeconomic challenges and operational shifts towards India. Redburn-Atlantic also initiated coverage on EPAM Systems with a Neutral rating, citing significant operational changes due to the ongoing conflict in Ukraine, which has impacted the company's revenues.
Furthermore, EPAM Systems has faced a series of price target cuts from Mizuho, Needham, and Jefferies, following a reduction in its revenue forecast for the year. These recent developments reflect a cautious stance on EPAM Systems' near-term prospects. Investors will be closely monitoring EPAM Systems' progress, particularly how it manages the shifts in its delivery footprint and captures demand for its services.
InvestingPro Insights
Following the upgrade from Jefferies, EPAM Systems, Inc. (NYSE:EPAM) presents an interesting case for investors, with a mix of financial metrics and market performance. According to the latest data from InvestingPro, EPAM holds a market capitalization of $11.58 billion and a Price to Earnings (P/E) ratio of 26.7. More specifically, the P/E ratio based on the last twelve months as of Q1 2024 stands at 23.02, reflecting the company's earnings relative to its share price.
InvestingPro Tips indicate that EPAM's stock has experienced significant returns over the past week with a 9.38% increase, suggesting a strong short-term performance. Additionally, analysts predict the company will be profitable this year, which is supported by a solid foundation of profitability over the last twelve months. It's worth noting that EPAM's liquid assets exceed its short-term obligations, providing financial stability and the ability to invest in growth opportunities like Gen-AI.
For investors seeking more in-depth analysis, InvestingPro offers additional tips on EPAM, which can be accessed on the platform. With the use of the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking a wealth of valuable insights to inform their investment decisions.
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