Let's get real for a minute. CTSH clients split their IT spend into 'lights on' and discretionary spend. The lights on stuff they have to stick with, but the discretionary spend will be slashed in a downturn. CTSH revenue is roughly 50/50 lights on/discretionary. In addition about 50% of their revenue is from financial services where discretionary spend will be slashed big time. Expect to see a further revision down on the forecast with the Q3 results (even if the quarter holds up - unlikely in my view).
While CTSH is a great long term bet I will look to buy in when it hits $15 in the not too distant future.
Guys, ask anyone in Cognizant! There is so much business coming in now that the company is far from declining. This time is probably the cheapest we will ever get the stock. All of this is a result of panic. But, the true companies will prevail. Financial institutions are running towards companies like Cognizant for their consulting services - they are not running away. I think its a big joke that stocks are falling for outsourcers. This is exactly what big companies are turning to in a time of crisis.
Keep in mind what happened in 2001 when the economy here was badly hurt. It was the outsourcers like CTSH, INFY, WIT, SAY, who gained the maximum. Everyone had written them out then too. In fact these companies were thankful to the downturn. In the last 5 yrs these same companies CTSH, INFY, WITH, SAY, have grown, matured, and can handle more complicated operations at cheaper cost. Rupee is weak too and headed to 50 against dollar which is an all time weak. It was 39 to a dollar just a few months back. That's a 28 % currency advantage.
I agree there is some uncertainty but at the same time the mergers, acquisitions would create new projects, and where do you think those projects would get executed - In US or India when money saving is the top priority. And these outsourcing companies are more credible than ever.
Dont let anyone fool you guys. The stock it already discounted as hell.
Lets face it, with all the buyouts mergers etc in the financials, Cognizant has the knowledge and experience to assist in integrating the new entities.
I see their services more essential now than ever.