What Happened?
Shares of digital engineering services company EPAM Systems (NYSE: EPAM) fell 5.7% in the afternoon session after Morgan Stanley lowered its price target on the information technology services provider's stock.
The investment bank reduced its price objective by 16.67% from $210.00 to $175.00, though it maintained an "equal weight" rating. Compounding the negative sentiment are broader industry concerns regarding potential U.S. legislation. The proposed HIRE (Halting International Relocation of Employment) Act seeks to discourage American companies from outsourcing work by imposing a 25% tax on payments to foreign entities. This poses a potential threat to the business model of IT service providers like EPAM. The stock was among the top decliners in the S&P 500, with investors also weighing existing concerns about the company's recent soft demand and shrinking returns on capital.
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What Is The Market Telling Us
EPAM’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 19 days ago when the stock gained 5.1% on the news that the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium. Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.
EPAM is down 32.4% since the beginning of the year, and at $154.92 per share, it is trading 42.1% below its 52-week high of $267.63 from February 2025. Investors who bought $1,000 worth of EPAM’s shares 5 years ago would now be looking at an investment worth $486.45.
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