Ticker Symbol
EPAM
Sector
Technology
Industry
Software and IT Services
Price (6th Jun., 2024)
$ 175
Market Capital
$ 10.16 B
Institutional ownership
94%
EPAM offers Digital engineering, cloud, and artificial intelligence-enabled transformation services with specialized software product and platform development services including product research, customer experience design and prototyping, program management, component design and integration, full lifecycle software testing, product deployment and end-user customization, performance tuning, product support and maintenance, managed services, as well as cross-platform migration and modernizing legacy platforms.
EPAM operates in three geographic segments, namely, North America, EMEA, and APAC with strong partnership with global pharmaceutical, medical and scientific technology, biotechnology companies and retail pharmacies to deliver sophisticated scientific informatics and enterprise technology solutions.
EPAM’s Moat: Deep Expertise and Sticky Client Relationships
EPAM has cultivated a strong economic moat through several factors, particularly in comparison to competitors like Accenture and Tata Consulting Services.
1. Specialization in Engineering Services: EPAM excels in its dedication to engineering services. This focused approach enables the company to attract and retain top-tier engineering talent, resulting in a superior level of expertise when compared to competitors with more diversified service offerings. This specialization proves especially beneficial for clients in need of intricate engineering solutions.
2. Full-Cycle Engagement: In contrast to certain competitors that concentrate on particular phases of software development, EPAM provides a holistic service approach. The company is capable of participating in the complete software lifecycle, encompassing inception, development, customization, optimization, and enhancements. This comprehensive offering delivers a streamlined experience for clients, simplifying vendor management complexities.
3. Switching Costs: EPAM’s comprehensive services create substantial client loyalty. As the company gains in-depth knowledge of a client’s software and processes, transitioning to another provider becomes challenging and costly. This deters clients from exploring other options, solidifying EPAM’s position as their preferred partner for future engagements.
4. Expertise Breeds Trust: The focus on engineering at EPAM attracts highly skilled individuals. Clients develop trust in these experts, fostering long-term relationships. This not only reduces turnover but also positions EPAM as a strategic partner for clients, increasing the likelihood of future project engagement.
EPAM’s competitive advantage stems from a blend of profound technical proficiency, an extensive service portfolio, and the consequential high switching costs for clients. These elements collectively fortify EPAM’s position in the market and pave the way for its sustained success.
EPAM’s recent decline is attributed to lowered revenue outlook, citing challenging demand environment and margin pressures, along with sluggish digital project investments affecting growth prospects.
The rise in interest rates and broader market downturn is further diminishing investor confidence in tech stocks. The highly competitive digital transformation sector sees new and established companies expanding their offerings, intensifying pressure on EPAM’s market share.
Disclaimer: As of the date of this report, we hold positions in EPAM; however, this report should not be considered as a recommendation to buy or sell.
