Why Cognizant Technology Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of IT services specialist Cognizant Technology Solutions (Nasdaq: CTSH  ) plummeted 19% on Monday after the company's full-year guidance disappointed Wall Street.

So what: Cognizant's first-quarter results managed to top estimates, but a big cut to its second-quarter and full-year outlook confirms previous concerns over a slowdown in the space. Last month, Indian counterparts Wipro and Infosys also issued disappointing guidance, suggesting that the shaky global economy continues to weigh heavily on IT spending.   

Now what: For the full year, management now sees adjusted EPS of $3.62 on revenue of at least $7.34 billion, down from its prior view of $3.69 and $7.5 billion, respectively. "Due to a slower-than-anticipated acceleration in demand as we entered the second quarter," cautioned CEO Francisco D'Souza, "we are adopting a more conservative stance for the remainder of the year and revising our guidance to at least 20% revenue growth for 2012." With the stock flirting with its 52-week lows and trading at a reasonable forward P/E, however, much of that bleakness might now be baked into the price.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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