Science Applications International ( NYSE: SAIC ) on Tuesday was downgraded to Equal weight from Overweight and Parsons ( NYSE: PSN ) to Underweight from Equal weight by analysts at Morgan Stanley. They said the companies are less likely to rise in value after their recent performance.
Parsons ( PSN ), a provider of technology to security and infrastructure markets, recently traded at 15% to 20% premium to its peer group, according to Morgan Stanley.
“As comps become more difficult and organic growth moderates, we believe the multiple will revert, creating downside risk from here,” Matthew Sharpe, analyst at Morgan Stanley, said in a Jan. 3 report.
The bank set a price target of $40 a share on Parsons ( PSN ) based on a multiple of 13 times estimated EBITDA for 2023. Part of the multiple recognizes the company’s “unleveraged balance sheet.”
Parsons ( PSN ) last year gained 33%, contrasting with a 15% decline for the Standard & Poor’s 400 midcap stock index ( SP400 )
SAIC ( SAIC ), a provider of information technology services, has risen in value to narrow the discount it once had compared with peers, according to Morgan Stanley.
“The company provided a multi-year view of cash generation and growth in early December, highlighting dynamics we believed to be underappreciated at the time,” Sharpe said. “With this catalyst now off the table, we see little over the course of 2023 to push the stock higher.”
The bank raised its price target for ( SAIC ) to $114 a share from $110 previously, based on a multiple of 12 times estimated EBITDA for 2023.
SAIC ( SAIC ) last year rose about 30%, contrasting with a 20% decline for the Standard & Poor’s 500 stock index ( SP500 ). The stock declined less than 1% to $110.18 a share by 11:44 a.m. ET Tuesday.
Morgan Stanley also upgraded CACI International ( CACI ) to Overweight from Equal weight.
For further details see:
SAIC, Parsons downgraded by Morgan Stanley on recent valuations