EPAM Systems downgraded at several firms after a surprise guidance cut

EPAM Systems Inc (NYSE:) was downgraded at five Wall Street firms after the company lowered its Q2/23 and full-year guidance due to further deterioration in the near-term demand environment, which resulted in a share price drop of more than 21% on Monday.

Q2 revenues are now expected to be in the range of $1.1- $1.17 billion (2.5% year-over-year decrease at the midpoint), while full-year revenues are now seen at $4.65-$4.80B (2% year-over-year decrease at the midpoint).

Citi downgraded the company to Neutral from Buy and cut its price target to $220.00 from $310.00, noting that both the magnitude and timing of the update surprised them.

The bank lowered its estimates on EPAM on a softer client spending environment, slower pipeline conversions, and delayed client decision-making.

Barclays downgraded the company to Equalweight from Overweight and cuts its price target to $220.00 from $310.00 as they believe macro-related headwinds, headcount re-calibration, and uncertainty from the Russia/Ukraine conflict will continue to pressure the stock in the near term.

While the firm made the decision to move to the sidelines, it believes that EPAM’s management team is capable of reinvigorating growth once the macro environment turns more positive.

Meanwhile, BofA Securities downgraded the company to Underperform from Buy and cut its price target to $223.00 from $310.00. According to the bank, recent quarters have seen management credibility take a hit, and while the latest guide seems potentially de-risked, they believe yesterday’s update tips EPAM into being more of “show me” story.