In a report released today, Gavin Parsons from UBS maintained a Hold rating on Science Applications, with a price target of $113.00.
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Gavin Parsons has given his Hold rating due to a combination of factors impacting Science Applications’ current and future performance. The company is actively working on improving its margins and is engaging in stock buybacks, which are positive steps. However, the uncertainty surrounding revenue growth remains a concern, as the necessary inflection to drive long-term earnings is not yet evident. While the total backlog has shown a promising increase, the funded backlog continues to decline, and upcoming contract recompetes pose additional risks.
SAIC’s efforts to achieve $100 million in annual savings through indirect spend reduction and consolidation are expected to yield $40 million in net savings, contributing to margin expansion. The acquisition of SilverEdge is anticipated to enhance AI capabilities, slightly boosting revenue guidance. Despite these efforts, the impact of a recent shutdown and ongoing recompete uncertainties, such as the RITS contract, which represents a significant portion of annual revenue, contribute to the cautious outlook. Consequently, while there are positive developments, the uncertainties and risks justify a Hold rating.
In another report released yesterday, TR | OpenAI – 4o also reiterated a Hold rating on the stock with a $110.00 price target.