Elliott Management Sends Letter to Cognizant Technology

I hope everyone had a great Thanksgiving. There’s an interesting news story this morning. Elliott Management has sent a letter to Cognizant Technology Solutions outlining how the company can get its stock to $80 to $90 per share by the end of next year. CTSH closed Friday at $53. Elliott owns more than 4% of the stock.

You can see the full letter here. Elliott believes that CTSH is far from its potential. Here’s a sample:

In addition, Cognizant’s relative valuation illustrates a profound loss of confidence amongst the shareholder base. Historically, Cognizant had been viewed as the premier franchise within the large-cap IT services space and had therefore traded at a meaningful premium to its peers and the broader market. However, Cognizant’s valuation premium has now entirely eroded. Despite maintaining an industry-leading growth outlook, Cognizant now trades at near parity to its Indian heritage peers and at a significant discount to both Accenture and the S&P500 for the first time.

For the most part, their complaint seems to be that Cognizant has been too conservative (too much cash, too little debt). Frankly, I’d take that as a compliment.

Posted by on November 28th, 2016 at 9:10 am

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.