Citi says buy this information technology stock with more than 20% upside

Published Fri, Oct 20 20237:04 AM EDTUpdated Fri, Oct 20 202312:52 PM EDT

Citi thinks it's time for investors to consider buying Cognizant . The bank upgraded shares of the information technology and consulting firm to buy from neutral, accompanied by a raise in price target to $80 from $72. This new forecast implies a 22% upside from Thursday's closing price. Shares of Cognizant are up 14.4% in 2023. Analyst Ashwin Shirvaikar noted that while the stock has done well this year, it remains attractive. CTSH YTD mountain CTSH YTD chart Shirvaikar thinks Cognizant's growth outlook seems promising for the year ahead as the company's bookings momentum grows. The firm's emphasis on greater management outreach, employee engagement and cost competitiveness have all contributed to Cognizant's abilities to accelerate the rate of its deal bookings. "Despite macro uncertainty, Cognizant has seen solid bookings momentum since late 2022 and we expect these trends to continue in 3Q23 with a healthy large deal pipeline remaining," the analyst wrote. "Although there is still macro uncertainty heading into 2024 as well as uncertainty around when discretionary spend pressures will ease, this bookings momentum gives Cognizant higher visibility into 2024 and a baseline for growth as these deals ramp." Heading into 2024, Shirvaikar views the stock's expectations as relatively de-risked, with investors expecting "achievable" lower growth numbers. The absence of company-specific headwinds such as large contract exits should also relieve some pressure next year. Meanwhile, the analyst noted that Cognizant seems well-equipped to offset the margin pressure that often comes with large deal bookings momentum. Shirvaikar added that the firm's new management brings an extensive and successful track record to the table, which has contributed to positive culture changes already at the company. Ravi Kumar S took over as CEO of Cognizant in January. Before joining Cognizant, he worked as chief operating officer of Infosys. — CNBC's Michael Bloom contributed to this report.