JPMorgan downgrades EPAM Systems stock rating on reorganization

Investing.com reports that JPMorgan has revised its rating on EPAM Systems (NYSE:EPAM) stock to Neutral from Overweight, setting a price target of $120.00. The company's market capitalization stands at $5.77 billion, with its shares currently trading at $111.85. Despite the downgrade, JPMorgan maintains that EPAM is undervalued, and its shares are listed among the platform's Most Undervalued stocks.

The downgrade is attributed to the company's ongoing commercial reorganization in North America, aimed at selling non-engineering skill-sets. The firm warns that the benefits from this transition may not materialize for some time, potentially impacting near-term growth rates and margins. EPAM's industry face challenges, particularly in the Digital ITS segment, and JPMorgan does not anticipate the stock to outperform its peers in the near future until growth trends improve.

Analysts have already lowered their earnings forecasts for the upcoming period by 13, further emphasizing concerns over near-term performance. JPMorgan expects it will take time for management to regain the trust of investors and believes there is no imminent catalyst to address concerns about AI risks. Although EPAM stock has gained around 20% since its earnings-driven decline, it has lagged behind its peers, which have risen between 5% to 11% in the same timeframe.

EPAM's stock has still experienced a 45% decline year-to-date. For those interested in a more detailed analysis of EPAM's valuation and growth potential, the Pro Research Report offers comprehensive insights. Meanwhile, EPAM Systems' second-quarter results for fiscal 2026 surpassed analyst expectations, with non-GAAP earnings increasing to $3.38 per share from $2.77 a year earlier.

Revenue for the quarter grew by 4.5% to $1.42 billion, meeting projections. Despite these positive figures, EPAM lowered its full-year revenue guidance due to slower growth in North America. As a result, Guggenheim Securities lowered its price target for EPAM from $165 to $140 while maintaining a Buy rating. William Blair also downgraded EPAM Systems to Market Perform from Outperform, citing persistent North American challenges and limited growth prospects through 2026.

These factors underline the obstacles EPAM Systems must overcome despite its strong quarterly performance.