According to The Wall Street Journal, activist investor Mantle Ridge has built a $1 billion+ stake in Cognizant Technology Solutions (CTSH), believing the stock remains undervalued.
The firm began buying shares of the information technology services company in late 2022 when prices were in the high $50s to low $60s range. Today, Cognizant trades at around $83 per share, giving it a market value of more than $41 billion.
Unlike many activist investors, Mantle Ridge has taken a more discreet approach, opting not to nominate board members or push for major changes. Instead, it has been privately engaging with Cognizant’s leadership, emphasizing the company’s potential for further growth.
Cognizant has faced revenue stagnation in recent years, with a slight revenue decline in 2023, followed by a 2% increase in 2024. However, since appointing CEO Ravi Kumar in January 2023, the company has made strides in improving performance, delivering a 40% total shareholder return. Cognizant also positions itself for the AI-driven future, aiming to accelerate revenue growth and expand margins.
Despite Cognizant’s recent progress, Mantle Ridge believes the market still undervalues its potential. The firm remains committed to closely engaging with management to meet growth targets. Investors reacted positively to the news, with Cognizant’s stock surging 5.13% after hours to $87.50 as confidence in the company’s future strengthened.
Is Cognizant a Good Stock to Buy?
It looks like the market reacted favorably to the recent news. However, based on 12 analysts’ ratings, Cognizant is considered a hold. The average price target for CTSH stock is $90.91, implying a 9.23% upside potential.
