On Friday, Jefferies analyst Sheila Kahyaoglu adjusted the price target for Parsons Corp . (NYSE:PSN) shares, decreasing it to $100 from the previous $110 while maintaining a Buy rating on the stock. The revision comes as the stock trades at $83.55, having declined 10.4% over the past week. The revision is attributed to anticipated challenges in sustaining the robust organic growth rate Parsons experienced in the past two years. According to InvestingPro analysis, the company currently appears undervalued despite trading at a high P/E multiple of 112.7x.
Parsons Corp., which recently saw an impressive approximately 23% organic growth during the 2023-24 period, is projected to experience a slowdown to 5% in 2025-26. The company has demonstrated strong performance with revenue growth of 28.88% in the last twelve months, reaching $6.51 billion. Despite facing tougher comparisons in the coming years, Parsons is not expected to have a significant gap in sales. Specifically, the company will not be missing $550 million or 8% of its sales due to the absence of a Department of State Humanitarian contract, which is secure for the foreseeable future, potentially extending through 2032.
The adjustment in the price target by Jefferies reflects a recalibration of estimates based on these tougher comparisons and a reduced multiple. This reduction also takes into account the volatility of the stock’s movement in response to unfounded news and concerns about the cryptocurrency Dogecoin (DOGE). The new price target is now set based on a market multiple as opposed to the previous approximately 20% premium on the anticipated 2026 earnings per share (EPS) of $4.35.
Kahyaoglu’s commentary underscores the reasoning behind the revised price target, highlighting the influence of market conditions and external factors on Parsons’ stock valuation. The expectation of continued, albeit slower, growth for Parsons is encapsulated in the maintained Buy rating, suggesting that, in the analyst’s view, the company still holds potential for investors despite the adjusted price target. With a "Good" financial health score from InvestingPro and the next earnings report due on February 19, investors can access comprehensive analysis and 10+ additional ProTips through the platform’s detailed research reports.
In other recent news, CACI International reported a 45% decrease in quarterly bookings, totaling $1.2 billion, down from $2.2 billion in the same period last year. This development prompted a drop in shares of government services companies including Booz Allen (NYSE:BAH) Hamilton and Science Applications (NASDAQ:SAIC) International Corp. Despite these concerns, analysts from Jefferies and Truist provided a mix of caution and optimism, highlighting CACI’s alignment with government efficiency initiatives and its strong pipeline.
In a related development, Parsons Corp. shares fell following a downgrade from analysts at William Blair due to concerns over a key U.S. State Department contract. This contract, which is significant to Parsons’ total revenue, is pending renewal and has raised concerns due to policy shifts indicated by the new administration.
Furthermore, Parsons Corp. also had its stock rating downgraded from Outperform to Market Perform by both William Blair and Raymond (NSE:RYMD) James. These decisions were primarily influenced by potential risks related to a significant U.S. State Department contract and concerns about slowing growth and challenging comparisons.
Lastly, shares of government services companies such as CACI, Parsons, Leidos Holdings (NYSE:LDOS), and Booz Allen Hamilton increased following Elon Musk’s expression of doubt over his government efficiency panel’s ability to achieve $2 trillion in cuts to the US federal budget. This statement led to a positive market response for government-services stocks.
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