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The underperformance of EPAM’s shares can be attributable to highly volatile market conditions amid the ongoing macroeconomic uncertainties. Factors, including investors’ concerns over the Federal Reserve's interest rate policies and fears of a looming U.S. recession, have weighed on tech companies and that has not spared Epam either.
Epam’s sales decline has also made investors cautious about its near-term prospects. The company’s revenues have been in a continuous declining trend since the second quarter of 2023. Also, the ongoing Russo-Ukrainian war has affected the company's top line. However, the company is trying to recover both inorganically and organically.
EPAM Expands Through Acquisitions
EPAM is working to recover from this downturn by pursuing strategic acquisitions aimed at expanding its market presence and enhancing its product expertise. In 2024, the company acquired Odysseus and previously announced an agreement to acquire NEORIS, further strengthening its capabilities.
Epam Systems recently announced that it has also signed an agreement to acquire First Derivative, a Northern Ireland-based consulting and managed services business specializing in capital markets and financial services. This acquisition will bring more than 100 clients from capital markets, banking operations and asset servicing markets.
The acquisition of First Derivative will deepen EPAM’s presence in North America, Europe, and the APAC region since the bank has its financial operations in these geographies. EPAM will further combine its digital transformation expertise with First Derivative’s generative AI-enabled financial and business solutions. The acquisition is expected to close by the fourth quarter of 2024, pending regulatory approvals.
EPAM YTD Performance Chart
Image Source: Zacks Investment Research
EPAM Strengthens Footprints in the AI Arena
In the past year, Epam Systems has achieved numerous milestones in the artificial intelligence (AI) space. EPAM became a partner of Microsoft’s (MSFT - Free Report) Globally Managed Enterprise Systems Integrator (SI), which expanded its AI capabilities.
EPAM has been a long-term collaborator of Microsoft for its cloud needs. The recent promotion in its partner status will enable EPAM to build cloud-based applications through Azure OpenAI Service.
EPAM is a Salesforce (CRM - Free Report) partner for the latter’s AI capabilities. In the realm of data management, Epam Systems has partners like IQVIA (IQV - Free Report) , Informatica, MicroStrategy and MongoDB.
Epam Systems’ partnership with CRM gave rise to the Salesforce Service Agent AI Coach. This AI-powered tool analyzes interactions between customer service agents and customers. EPAM takes data and advanced analytics solutions in the life science space from IQVIA.
To advance its footprint in the AI space, EPAM also launched the AI-powered DIAL Open Source Platform and DIAL Orchestration Platform in 2023.
Economic and Competitive Headwinds
EPAM’s near-term prospects are likely to have been hurt by weakening IT spending. Still-high interest rates and protracted inflationary conditions are affecting consumer spending. Enterprises are also postponing their large IT spending plans due to a softening global economy amid ongoing macroeconomic and geopolitical issues. This does not bode well for EPAM’s prospects in the near term.
Epam Systems also faces tough competition in the software market, with numerous players ranging from large global firms to specialized boutique firms. EPAM’s competition is with major players like Accenture, Cognizant and Infosys, which have significantly larger resource bases and broader service offerings. These competitors have been aggressively expanding their capabilities and market reach, which could potentially erode EPAM's market share.
What Should Investors Do?
Although Epam Systems’ shares have been experiencing a declining trend due to near-term macroeconomic challenges, the stock will bounce back once these headwinds subside. EPAM has been rapidly expanding in the emerging AI space through partnerships and acquisitions, which might offer EPAM renewed growth
Additionally, the stock seems to be slightly stretched on the valuation front as depicted by the Zacks Value Score of C. Therefore, it is prudent for investors to wait for a favorable entry point. EPAM stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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EPAM Expands With First Derivative Buyout: What Should Investors Do?
EPAM Systems (EPAM - Free Report) has seen its share price plunge 35.3% year to date, underperforming the Zacks Computers - IT Services industry, Zacks Computer and Technology sector and the S&P 500’s return of 8.4%, 22.3% and 19.6%, respectively.
The underperformance of EPAM’s shares can be attributable to highly volatile market conditions amid the ongoing macroeconomic uncertainties. Factors, including investors’ concerns over the Federal Reserve's interest rate policies and fears of a looming U.S. recession, have weighed on tech companies and that has not spared Epam either.
Epam’s sales decline has also made investors cautious about its near-term prospects. The company’s revenues have been in a continuous declining trend since the second quarter of 2023. Also, the ongoing Russo-Ukrainian war has affected the company's top line. However, the company is trying to recover both inorganically and organically.
EPAM Expands Through Acquisitions
EPAM is working to recover from this downturn by pursuing strategic acquisitions aimed at expanding its market presence and enhancing its product expertise. In 2024, the company acquired Odysseus and previously announced an agreement to acquire NEORIS, further strengthening its capabilities.
Epam Systems recently announced that it has also signed an agreement to acquire First Derivative, a Northern Ireland-based consulting and managed services business specializing in capital markets and financial services. This acquisition will bring more than 100 clients from capital markets, banking operations and asset servicing markets.
The acquisition of First Derivative will deepen EPAM’s presence in North America, Europe, and the APAC region since the bank has its financial operations in these geographies. EPAM will further combine its digital transformation expertise with First Derivative’s generative AI-enabled financial and business solutions. The acquisition is expected to close by the fourth quarter of 2024, pending regulatory approvals.
EPAM YTD Performance Chart
Image Source: Zacks Investment Research
EPAM Strengthens Footprints in the AI Arena
In the past year, Epam Systems has achieved numerous milestones in the artificial intelligence (AI) space. EPAM became a partner of Microsoft’s (MSFT - Free Report) Globally Managed Enterprise Systems Integrator (SI), which expanded its AI capabilities.
EPAM has been a long-term collaborator of Microsoft for its cloud needs. The recent promotion in its partner status will enable EPAM to build cloud-based applications through Azure OpenAI Service.
EPAM is a Salesforce (CRM - Free Report) partner for the latter’s AI capabilities. In the realm of data management, Epam Systems has partners like IQVIA (IQV - Free Report) , Informatica, MicroStrategy and MongoDB.
Epam Systems’ partnership with CRM gave rise to the Salesforce Service Agent AI Coach. This AI-powered tool analyzes interactions between customer service agents and customers. EPAM takes data and advanced analytics solutions in the life science space from IQVIA.
To advance its footprint in the AI space, EPAM also launched the AI-powered DIAL Open Source Platform and DIAL Orchestration Platform in 2023.
Economic and Competitive Headwinds
EPAM’s near-term prospects are likely to have been hurt by weakening IT spending. Still-high interest rates and protracted inflationary conditions are affecting consumer spending. Enterprises are also postponing their large IT spending plans due to a softening global economy amid ongoing macroeconomic and geopolitical issues. This does not bode well for EPAM’s prospects in the near term.
Epam Systems also faces tough competition in the software market, with numerous players ranging from large global firms to specialized boutique firms. EPAM’s competition is with major players like Accenture, Cognizant and Infosys, which have significantly larger resource bases and broader service offerings. These competitors have been aggressively expanding their capabilities and market reach, which could potentially erode EPAM's market share.
What Should Investors Do?
Although Epam Systems’ shares have been experiencing a declining trend due to near-term macroeconomic challenges, the stock will bounce back once these headwinds subside. EPAM has been rapidly expanding in the emerging AI space through partnerships and acquisitions, which might offer EPAM renewed growth
Additionally, the stock seems to be slightly stretched on the valuation front as depicted by the Zacks Value Score of C. Therefore, it is prudent for investors to wait for a favorable entry point. EPAM stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.