Opportunity in Tech Shares Following Earnings Report

Cognizant Technology Services (CTSH) is 5% lower but off of its worse levels of the day after reporting fourth-quarter results last night. Its earnings per share (EPS) of $0.67 vs. $1.01 was $0.25 below expectations, strictly due to the cancelation of an ambitious project that Cognizant and its client felt was not paying off. Guidance for 2021 was good, with the company looking for revenue growth of 4% to 7%, and EPS of $3.90 to $4.02, which was slightly above expectations.

The project cancelation does hurt the company’s credibility slightly, and I think it may take a clean quarter to get investors to move past it. However, the company’s transformation seems to be going well, with sales growing again, orders up by double-digit percentages since last year and the company spending big (50% of free cash flow) on acquisitions to further improve its skillset.

CTSH is a buy below $75. My target is $85.