EPAM Shares Continue to Fall on Ukraine Crisis & Russia Exit

EPAM SystemsEPAM shares closed in the red on Mar 4 due to escalating Russia-Ukraine crisis and the company’s decision to shut down operations in Russia. It is worth mentioning that after months of growing tensions between the two countries, Russia invaded Ukraine on Feb 21.

Since then, the stock has plunged 55.2% on growing concerns over business disruptions amid the ongoing war between Russia and Ukraine.

EPAM recently announced that it will discontinue its services in Russia in support of Ukraine. The company’s move is consistent with the US government’s Mar 24 announcement of cutting off direct technological export to Russia as part of a series of economic and financial sanctions imposed on the country for initiating military attack on Ukraine.

EPAM has significant exposure in the region with majority of its delivery centers located in Central and Eastern Europe (“CEE”). In fact, the company’s largest delivery centers are located in Belarus, Russia and Ukraine. It has approximately 9,000 and 14,000 employees in Russia and Ukraine, respectively.
 

EPAM Systems, Inc. Price and Consensus

EPAM Systems, Inc. Price and Consensus

EPAM Systems, Inc. price-consensus-chart | EPAM Systems, Inc. Quote

Per EPAM’s management, the company will offer a $100 million humanitarian aid to the Ukrainian employees and their families. The company stated that it is in full support of all the sanctions. It also declared that it is evaluating other operations in the region.

EPAM stated that it will offer transition support to its existing Russian customer base. In the latest quarterly report, revenues from CEE were $55 million (accounting for 5% of total revenues).

In fiscal 2021, EPAM generated $168 million of revenues from CEE. Escalation in the ongoing conflict is likely to hurt the company’s revenues and profitability.

Besides, EPAM’s market share and revenues depend on client relationships and the number of contracts it secures. This, along with the limited scope for product differentiation, makes renegotiation of large contracts extremely important. As a result, competition from companies like Accenture and Infosys is a constant pressure.

Also, tough competition from regions like Europe might increase pricing pressure for EPAM.

Zacks Rank & Key Picks

EPAM currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader computer and technology sector are Advanced Micro Devices AMD and Axcelis Technologies ACLS, sporting a Zacks Rank #1 (Strong Buy), and the iPhone maker Apple AAPL carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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AMD’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 17%. Shares of AMD have gained 42.8% in the past year.

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Apple’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 20.3%. AAPL stock has appreciated 36.8% in the past year.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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