Despite Sluggish Demand, EPAM Poised For Potential 20% Growth By FY24: Analyst

Needham analyst Mayank Tandon reiterated a Buy rating on the shares of EPAM Systems, Inc. EPAM, lowering the price target to $275 from $325.
The analyst lowered the price target after the company slashed its second quarter and full year 2023 financial outlook due to sluggishness in the near-term demand environment.
Due to ongoing economic uncertainty, clients across most of EPAM's geographies and industry verticals have become increasingly cautious about digital transformation spending, the analyst notes.
Related: Why EPAM Systems Shares Are Slumping Today
Given the continued uncertainty in the demand environment, the company sees second-quarter revenues of $1.160 billion-$1.170 billion, compared with prior guidance of $1.195 billion-$1.205 billion.EPAM now expects Q2 non-GAAP EPS of $2.33-$2.40, compared with prior guidance of $2.38-$2.46.
The analyst notes that clients have tempered spending and pipeline conversions are slowing as economic conditions continue to dampen IT services spending.
Considering this, on bear case assumptions, Tandon thinks that if there is a prolonged economic downturn, EPAM's growth may remain well below historical levels throughout FY23 and FY24.
On the positive side, the analyst believes EPAM can return to 20%+ organic revenue growth in mid to late FY24 if economic conditions improve and Global 2000 customers release their IT budgets.
Overall, the analyst reduced the FY23 EPS estimate from $10.70 to $10.10 and the FY24 EPS estimate from $13.00 to $12.20.
Price Action: EPAM shares are trading lower by 20.4% to $206.47 on the last check Monday.

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