Cognizant Technology's Stock Soars After Activist Investor Urges Value Creation Moves

By Tomi KilgoreMarketsMarketWatch Pulse

Shares of Cognizant Technology Solutions Corp. soared 10% in active premarket trade, after activist investor Elliott Management Corp. detailed value creation measures that it believes could propel the stock by nearly 70% in just over a year. Elliott said in a letter to Cognizant's board that it owns over 4% of the information technology service provider, making it one of the top four shareholders. The investor said one reason for the stock's underperformance relative to peers and to the broader market is that it follows a strategy developed nearly two decades ago, with target margins that are 10 percentage points lower than direct peers. Elliott's plan is based on the need for fundamental operational improvements, efficient capital allocation and effective oversight and incentive alignment. Elliott said the stock could "achieve a value of $80-$90+ per share be the end of 2107," which is 50% to 69% above Friday's closing price of $53.25. The stock has dropped 11% year to date through Friday, while shares of peer Accenture PLC have run up 16% and the S&P 500 has climbed 8.3%.

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