Analyst Reiterates Positive Rating On EPAM Systems Amid Reduced Forecast: A Deep Dive Into Revised Estimates

Susquehanna analyst James E Friedman reiterated a Positive rating on the shares of EPAM Systems, Inc. EPAM, lowering the price target to $300 from $350. 

The analyst lowered the price target to accommodate the cyclical - and structural - deterioration. He believes some clients of EPAM Systems may pause their spending ahead of architectural change. Friedman also remains concerned about whether the clients will return. 

Recently, EPAM Systems slashed its second quarter and FY23 financial outlook due to weakness in the near-term demand environment. After careful assessment of changes in the company's May and June forecast data, EPAM has seen a reduction in the total pipeline.

Also Read: EPAM Systems Downgraded by Multiple Analysts Amid Weak Demand and Financial Outlook Cut

Considering the above, the analyst lowered estimates for 2Q23 and FY23.

For 2Q23, Friedman model revenues of $1.16 billion (prior $1.20 billion) and adjusted EPS of $2.37 (prior $2.38).

For FY23, the analyst models revenues of $4.65 billion (prior $4.95 billion) and adjusted EPS of $9.92 (prior $10.60). 

The analyst also trimmed FY24 estimates. The FY24 revenues are estimated to be $5.03 billion (prior $5.35 billion), with adjusted operating margins of 17.0% (prior 17.6%) and non-GAAP EPS of $11.28 (prior $12.45).

That said, EPAM has demonstrated that despite changes in demand, the company can effectively source work and diversify delivery over time, the analyst notes. Thus, the analyst sees the current slowdown as likely temporary.

Price Target: EPAM shares are trading higher by 0.32% to $211.90 on the last check Friday.