Coding by day and fending off Russians by night — Ukrainian developers are built differently — many still meeting deliverables working in bomb shelters and garages.

EPAM Systems (NYSE:EPAM) — with over half its 58K workforce in Ukraine, Belarus or Russia — is down nearly 50% since the invasion started.

EPAM’s massive decade of growth

EPAM Systems is a global IT consulting and services firm with a presence in 40+ countries — helping customers with digital transformation and serving many industries including financial services, travel & consumer and healthcare.

EPAM had a tremendous run since going public in 2012:

• EPAM’s stock returned 1,457% (over 5,000% at its peak last November) — outperforming competitors IBM (NYSE:IBM) and Accenture (NYSE:ACN).
• Sales and operating earnings grew nearly 10x — from $300M sales in 2012 to $3.7B today.

For EPAM, COVID turned from a threat into an opportunity. IT spending accelerated from remote work demand and cloud adoption — with Gartner forecasting IT spending to increase 5.1% in North America in 2022.

Per Warren Buffett, customers rarely switch IT providers — a key reason for his IBM investment in 2011 — which he sold in 2018. Except IBM struggled — and EPAM thrived.

Then Putin popped the bubble…

In 2014, Ukraine-Russia conflicts disrupted operations — leading EPAM to accelerate hiring in other parts of the world — with 25% of its employees in Ukraine currently:

• Before invasion: Sales were expected to grow 37%, and analysts expected earnings to double by 2024.
• After invasion: EPAM withdrew its 2022 outlook, accelerated hiring in other countries and launched a $100M fund to relocate its Ukrainian employees.

Despite these setbacks, EPAM maintains a strong financial position with $1.4B in cash, little debt ($240M) and having profitability.

Investors: Laying out the scenarios

It’s uncertain how the invasion will impact EPAM long-term, but Value Punk — who wrote an in-depth report on EPAM — sees upside in several scenarios:

• Bull case: Ceasefire in Ukraine — $500 price target (PT) over two years.
• Base case: Half its Ukrainian employees (12% of total workforce) aren’t able to work but Belarus and Russia offices stay open — $330 PT.
• Bear case: More sanctions implemented and EPAM is required to close operations in Belarus and Russia — $240 PT.

At its current $225 price, it gains in each scenario — but EPAM is likely to remain volatile —  on news of ceasefires or escalations.

EPAM could be paying to hire in an unfavorable position — with labor markets for tech employees in tight supply.