Is Cognizant Poised To Gain From Its Focus On Growth Areas?

On Jun 13, we issued an updated research report on Cognizant Technology Solutions Corporation (NASDAQ:CTSH) .

Earlier this month, the company was named a leader in worldwide business analytics consulting and systems integration in the IDC Marketscape report. The report cited that Cognizant is gaining significant traction with its capacity to “transform data into tangible business benefits through a global innovation and delivery ecosystem.”

While the company has been a prominent technological services provider for the last few years, it is increasing its focus towards high profit areas like professional consulting and business-process outsourcing.

Analytics, that is obtaining actionable insights from large amounts of structured or unstructured data, has been gaining popularity among the tech companies. This is because it is one of the important technologies that support the automation, which has clearly become a focus area of most tech providers. Cognizant is increasingly leveraging analytics to provide more sophisticated end-to-end solutions (like outcome-based models) for its clients. The company has already been working on Business Process-as-a-Service, or BPaaS, which deploys both automation and analytics to enhance client processes.

Apart from analytics,Cognizant has also been gradually expanding its offerings in growth areas like social, mobile and cloud computing in order to get a more optimal business mix. We believe that these emerging areas can become key growth drivers for the company going ahead.Increasing exposure to fast growing verticals like financial services and healthcare is also a positive for the company.

Overall, we believe that these areas are placing the company quite well to drive growth in the long run, especially given the slowdown in global IT spending.

However, rising wages and customer concentration remain headwinds in the near term. In addition, rising competition from peers like Accenture (NYSE:ACN) , Infosys (NYSE:INFY) and Wipro Ltd (NYSE:WIT) also remains a concern.

COGNIZANT TECH Price and Consensus

COGNIZANT TECH Price and Consensus | COGNIZANT TECH Quote

Currently, Cognizant has a Zacks Rank #3 (Hold).