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EPAM Systems (EPAM) stock forecast: What’s next for the tech stock?

By Alejandro Arrieche

Edited by Alexandra Pankratyeva

14:08, 15 December 2021

Minsk, Belarus. May 2021. EPAM Systems logo on the roof of the building against blue the sky. EPAM Systems - leading global provider of digital platform engineering and software development services
EPAM Systems (EPAM) stock forecast: What’s next for the tech stock?

EPAM stock surged fourfold in a strong rally from lows of around $160 in March-April 2020 to $685 (13 December close). The stock has gained around 96% year-to-date.

Strong top-line and bottom-line growth has been in line with positive momentum for the tech sector as a whole.

What can be expected from this multinational IT company in the next few years? Can it keep delivering gains, or is the rally reaching a phase of exhaustion?

Join us as we take a closer look at the EPAM price action and the company’s fundamentals to outline a plausible EPAM stock price prediction roundup.

EPAM 5-year performance

EPAM stock news: Joining the S&P 500 index

On 4 November 4 this year, EPAM reported financial results covering the third quarter of its 2021 fiscal year. 

For the three months ended 30 September, the company reported total revenues of $988.54m, resulting in a 51.6% jump on the same quarter a year ago. 

The financial services, travel and consumer, and emerging segments delivered the strongest year-on-year growth for the company’s top line, while sales across all regions performed positively as well.

GAAP diluted earnings per share (EPS) for the period came in at $1.95 a share, representing a 27.5% jump on a year earlier. Adjusted EPS increased 46.7% to $2.42.

Meanwhile, on 7 December, S&P Global announced that EPAM Systems would join the S&P 500 index, effective on 14 December. The company replaces Kansas City Southern.

EPAM stock reacted positively to the news. The price rose 18% the day of the announcement, although the rally failed to push the price to a fresh all-time high.

EPAM stock analysis: Technical analysis

EPAM technical analysis

The latest price action on the EPAM stock chart  has formed a consolidation triangle that could point to a pause in the rally.

These symmetrical patterns are considered unbiased, meaning that they don’t favour a bearish or bullish outlook until they are resolved. 

Trading volume on 13 December saw nearly 11 million shares change hands on a day that saw the stock decline 1.7%. 

This figure exceeded the 10-day average by more than 9 times. It could have been caused by multiple index-tracking funds that have started to progressively add EPAM to their portfolios before 14 December – the day on which the stock joins the blue-chip S&P 500 index.

Meanwhile, momentum indicators have been recovering lately with the relative strength index (RSI) at 57, while the moving average convergence divergence (MACD) has entered into positive territory, pointing to a bullish outlook.

EPAM fundamental analysis: Full year guidance

During the first nine months of 2021, EPAM Systems reported total revenues of $2.65bn, resulting in a 36.6% jump on the same period a year ago. Over the same period, the company’s operating income grew 41%, up from $267.33m to $376.65m.

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The company’s GAAP net earnings during that same period landed at $339.37m, compared to the $241.62m reported a year ago. On an adjusted basis, earnings came in at $370.54m against $264.54m reported during the first three quarters of 2020.

Diluted earnings per share on a GAAP and adjusted basis ended at $5.75 and $6.28, respectively, compared to $4.14 and $4.53 the prior year.

EPAM Systems’ long-term debt by the end of September this year stood at $25m. Total assets by the end of this period were $3.24bn, including $1.27bn in cash and equivalents.

Given the strength of the first nine months of 2021, EPAM raised its full year outlook.

In a November press-release, EPAM said: “The Company now expects revenue growth for 2021 to be at least 40% on a GAAP basis, which includes a favourable foreign currency translation impact of approximately 2%. Revenue growth on a constant currency basis will now be at least 38%. The company expects acquisitions, including the acquisition of Emakina Group SA, will contribute approximately 4% to reported revenues.”
Jason Peterson, EPAM’s Chief Financial Officer, added during the Q3 earnings call: “While it is too early to give a detailed view of our business outlook for 2022, we believe the demand environment continues to support an elevated annual growth rate in excess of our traditional guidance of greater than 20%. However, we also believe it is important to establish and maintain a more sustainable growth rate in the coming year than that achieved in 2021.”
 

EPAM stock price prediction: Analyst sentiment

Is EPAM stock a ‘buy’, ‘sell’ or ‘hold’? According to data compiled by MarketBeat, as of 14 December 2021, the consensus recommendation for EPAM stock was ‘buy’, with a total of 9 analysts currently covering the stock holding a bullish rating, and no bears.

The consensus 12-month price target for EPAM Systems stock stood at $649.88 a share. The highest estimate was at $824 and the lowest at $440.

Positive sentiment is backed by the company’s outlook.

“EPAM is in exciting growth route in its 28-year journey because while looking at the present, we have clear line of sight to a fiscal year, which will be one of the highest-growing revenue years in our post-IPO history, that includes also breaking through to our $4bn revenue quarter at the end of 2021 and actually still reaching out our aspirational goal of doubling the company for the third time since 2012,” said Ark Dobkin, EPAM’s CEO, during the Q3 earnings call. 

EPAM stock analyst ratings and price targets

Commenting on the company’s prospects, Capital.com analyst Mikhail Karkhalev said:

“EPAM Systems, in my opinion, is one of the most promising companies in the software and consultancy market, and its share price is growing dynamically for a reason. The company has been on Fortune's list of the 100 fastest-growing companies for the last three years in a row, due to the growth in the number of clients and their geography. Today, EPAM serves clients worldwide and all three of its major markets – North America, Europe and Asia Pacific – have grown by more than 50%.” 

The analyst noted that the company's financials are also encouraging, with revenues, net income and EBITDA increasing quarter on quarter and year on year. “In the first 9 months of 2021 alone, the company's revenues have surpassed the whole of 2020 by 27% and its net profit by 30%,” Karkhalev added. 

However, he reminded investors of a downside risk, if the current rally loses steam: 

“After the dynamic growth, it is a bit dangerous to buy EPAM shares, as a correction may come to the market. The most sensible decision would be to wait for either a correction or a breakdown of the $720 level, as once it is broken, the price might test new highs quite dynamically.”

EPAM Systems (EPAM) stock forecast: Algorithm-based price targets

According to the technical analysis outlined above, a plausible EPAM share price forecast could see the stock trading relatively range-bound until the symmetrical triangle pattern shown in the chart is resolved either to the upside or the downside.

The following is a compilation of algorithm-based forecasts from third-party services (as of 14 December) that analysed the EPAM stock price history to draft plausible predictions.

Wallet Investor predicted EPAM stock could close 2021 at $694, indicating a potential 1.3% upside from the 13 December closing price of $685. The service indicated that the price could hit 914.414 by the end of 2022, rise to  $1,135.340 by the end of 2023 and 1,578.510 by the end of 2025. Its 5-year EPAM stock forecast expected the price to hit 1791.760 in December 2026.

GovCapital estimated the EPAM stock could reach $1024.342 by the end of 2022, 1429.183 by the end of 2023 and $2,410.081 by the end of 2025. Although the service didn’t provide price targets for 2030, its 5-year EPAM stock forecast suggested the stock could hit an average price of $2941.310 in December 2026.

When looking for EPAM price predictions, it’s important to bear in mind that analysts’ forecasts can be wrong. Projections are based on making a fundamental and technical study of the EPAM stock’s performance. Past performance is no guarantee of future results. 

It is important to do your own research and always remember your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. You should never invest money that you cannot afford to lose.

FAQ

Is EPAM stock a good buy?

The overwhelming majority of analysts covering EPAM agreed that the stock was a ‘buy’, according to the data compiled by MarketBeat, as of 14 December. However, investors should not rely on any recommendations to decide on whether to buy or sell EPAM Systems stock as many factors could end up driving the price way off these forecasts.

Why is EPAM stock going up?

The price of EPAM went up almost 18% on 8 December following news that the stock will be incorporated into the blue chip S&P 500 index. 

The incorporation of a stock into a major index typically leads to a jump in its price as multiple index-tracking funds must add the issue to their portfolios to perform similarly to their respective benchmark.

Will EPAM stock go up?

Both analysts and algorithm-based prediction services agreed that the price of EPAM stock would go up in the following years based on an analysis of the business’s fundamentals and the stock’s historical price trend.

A number of factors dictate whether stock prices rise or fall, including broader macroeconomic issues. There are no guarantees as markets are volatile. You should make your own assessment of the stock and the environment in which it trades.

Read more: Fortress Biotech (FBIO) stock forecast: Regulatory hurdles pose risk

Markets in this article

EPAM
EPAM
209.45 USD
9.6 +4.810%
EPAM
EPAM
209.45 USD
9.6 +4.810%
EPAM
EPAM
209.45 USD
9.6 +4.810%

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