Cognizant To Snap Up ESG Mobility, Boost Digital Automation

Cognizant inked a deal to acquire Germany-based ESG Mobility, a digital automotive engineering R&D provider for connected, autonomous and electric vehicles. The financial terms of the deal were not disclosed.

Through this acquisition, Cognizant’s (CTSH) automotive engineering expertise will be enhanced, mainly in connected vehicles. Notably, the global market for connected cars is projected to exceed $225 billion by 2027, according to Allied Market Research.

Cognizant’s Digital Business and Technology President said, “Our priority is providing clients with the capabilities they need to compete as modern digital businesses, and ESG Mobility is a natural complement to our existing connected mobility offerings and global delivery model. This acquisition will empower our clients to innovate more quickly in shaping the future of transportation.” (See Cognizant stock analysis on TipRanks)

The acquisition is likely to close in the second quarter of 2021. Upon closure of the deal, employees of ESG Mobility will join Cognizant’s Internet of Things (IoT) and Engineering Services Practice. Furthermore, around 1,000 engineering R&D specialists will become part of Cognizant’s automotive innovation hubs in Germany, the US, and China.

On Feb. 4, Needham analyst Mayank Tandon maintained a Hold rating “pending a better entry point.”

Tandon said, “Although we are constructive on CTSH’s efforts to pivot the business to digital-focused solutions, both through organic initiatives and targeted M&A, with the stock trading at ~16.5x ex-cash our FY22 EPS estimate, we believe the risk-reward remains neutral for a low double-digit EPS grower LT.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 7 Buys and 7 Holds. The average analyst price target of $86 implies 11.5% upside potential to current levels. Shares have increased 54.8% over the past year.

Cognizant scores an 8 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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