EPAM Systems Inc. (EPAM) is a digital platform engineer that provides software development for services worldwide. They provide customer experience design, business consultation, and technology innovation services, along with software development and testing services. Incorporated in 1993 and headquartered out of Pennsylvania, EPAM has more than 295 Forbes Global 2000 clients in its roster.
EPAM stock is trading in the red this year, as it has slipped 28.7% on a YTD basis. However, the stock is staging a comeback, up 25% off its mid-June lows.
EPAM Posts Mixed Q1 Results
EPAM System reported its Q1 earnings results on May 10, with revenue down 3.8% to $1.165 billion - but still narrowly above analysts’ $1.161 billion estimates. EPS decreased by 1 cent to $2.46, on net income of $116.24 million. Wall Street was looking for net income of $136.47 million on per-share earnings of $2.31.
During the quarter, EPAM bought back 396,000 shares for $120.6 million. Operating cash flow jumped to $129.9 million, representing a significant surge from last year’s $87.3 million as the company bolstered its cash position.
Management adjusted its full-year outlook, and now expects revenue between $4.575 billion and $4.675 billion, with non-diluted EPS in the range of $10.00 to $10.30.
Ahead of the next quarterly report, set to be released before the market opens on Aug. 8, the Wall Street consensus is calling for EPS of $1.72 on revenue of $1.14 billion. The company has a strong history of surpassing analysts' bottom-line estimates.
How Do Analysts Rate EPAM?
Analysts are generally bullish on the stock, with a consensus “Moderate Buy” rating and a mean price target of $228.95 - signifying an upside potential of 7.9% from Monday's close. Currently, 20 analysts are tracking EPAM, with 9 backing a “Strong Buy” rating, 1 maintaining a “Moderate Buy,” 9 issuing a “Hold” rating, and 1 going with a “Moderate Sell” rating.
Brokerage firm Jefferies recently upgraded EPAM stock from a “Hold” rating to a “Buy,” while also raising its target from $202 to $237. That new target signals roughly 12% expected upside, with the analysts predicting that EPAM should be a major catalyst - although they're not expecting any meaningful top-line boost until the second half of 2025, which makes EPAM a longer-term pick for AI investors.
Specifically, the analysts expects generative AI to contribute 500-1,000 basis points to annual organic growth 3-5 years from now, when AI implementations have become more mainstream. According to Jefferies, the top engineering talent and subject matter expertise is what gives EPAM the edge to benefit from AI adoption over the long haul.
Priced at a reasonable 21x forward earnings and still down 33% from 52-week highs, EPAM looks like a solid long-term pick to buy and hold at current levels.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
