Stifel reiterates Buy on EPAM Systems stock, $135 target maintained

Cognizant (CTSH) and EPAM Systems (EPAM) shares rose 7% after Accenture (ACN) reported Q4 revenue of $18.68B, exceeding guidance and analyst estimates. Accenture's strong results suggest increased IT services spending, benefiting peers like Cognizant and EPAM. Accenture's CEO highlighted broad-based growth, alleviating AI-driven demand concerns. Cognizant's Q3 report, due in November, will indicate if this trend is widespread.

EPAM Systems' stock rose 7.0% in pre-market trading, reaching $115.89, driven by activist pressure, improving earnings, and low valuation. Accenture's strong earnings report and a supportive market backdrop contributed to the surge. EPAM's stock remains below its 52-week high of $222.53 but above its low of $73.06.

EPAM Systems (EPAM) stock has risen 17.32% over the past month and 27.17% over three months, despite a 41.18% year-to-date decline. Activist investor Engine Capital LP urged the company to consider a $750 million buyback, a potential sale, and governance changes. The stock closed at $117.91, slightly above a fair value estimate of $113.38. EPAM's P/E ratio of 15.1x is below industry and peer averages, raising questions about its valuation and future performance.

EPAM Systems (EPAM) partnered with Wiz to enhance cybersecurity offerings. The company reported Q2 revenue growth of 4.5% but lowered full-year guidance to 3.2%-4.2%. GAAP EPS rose 26.3% YoY to $1.97. The partnership aims to address cloud security risks, while financials show cautious growth and cash flow challenges.

Hedge fund Engine Capital, owning 1.5% of EPAM, demands the company buy back $750 million in shares, consider a sale, reform management incentives, and renew the board. EPAM trades at 5.4x EV/EBITDA, below peers and sector M&A multiples, with shareholder returns down 36% YoY and 82% over five years. The company has $794 million in free cash and no debt. EPAM's AI-native revenue reached $160 million in Q2 2026, targeting $600 million for the year. The board has not yet responded to the demands.

Engine Capital, owning 1.5% of EPAM Systems, urged the board to initiate aggressive share buybacks using $750M in cash and future free cash flow, potentially retiring 60-80% of shares by 2028, or conduct a strategic review including a possible sale. EPAM's shares have declined over 40% year-to-date.