Figma Shares Indicated To Open $105/$110
On Friday, TD Cowen analysts downgraded Parsons Corp . (NYSE: NYSE:PSN) stock rating from Buy to Hold and significantly reduced the price target to $56 from the previous $105. The downgrade, which comes as the stock has declined over 15% in the past week and 35% over six months according to InvestingPro data, was prompted by concerns over the company’s anticipated growth slowdown and potential overestimation in its financial guidance.
Analysts at TD Cowen pointed to a stark contrast in Parsons’ growth trajectory, citing a shift from a robust 22% organic growth in the calendar year 2024 to an expected flat to low single-digit percentage growth in the calendar year 2025. This deceleration is seen as a critical factor behind the revision of the stock’s outlook. Despite current challenges, InvestingPro analysis indicates the company maintains a "GOOD" overall financial health score, with particularly strong metrics in growth and cash flow management.
The revised price target of $56 is based on a 12 times the estimated enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) for the calendar year 2025, compared to the current EV/EBITDA of 13.7x. The analysts expressed concern over the company’s guidance, which may not be as conservative as previously thought due to large sales assumptions from "confidential" contracts. According to InvestingPro’s Fair Value analysis, the stock appears to be trading below its intrinsic value, with 10 additional real-time ProTips available for subscribers.
The downgrade interrupts more than a year of consistent beat-and-raise momentum for Parsons stock. The analysts noted that the change in the investment thesis was too significant to overlook, leading to the adjustment in their rating and price target for the company’s shares.
Parsons Corp. will now have to navigate the market with a Hold rating from TD Cowen, as investors digest the implications of the anticipated growth deceleration and the subsequent adjustment in the firm’s stock valuation.
In other recent news, Parsons Corporation reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of $0.78, which did not meet the anticipated $0.91. Additionally, the revenue for the quarter was $1.73 billion, falling short of the forecasted $1.76 billion. Despite these results, Parsons achieved a record full-year revenue exceeding $6.7 billion, highlighting significant growth in adjusted EBITDA and contract awards. Analyst firms have adjusted their outlooks on Parsons following these earnings. Jefferies and Truist Securities both reduced their price targets to $85 while maintaining a Buy rating, reflecting concerns over a confidential program’s potential risks. KeyBanc Capital Markets also lowered its price target to $76, maintaining an Overweight rating, citing lower than expected adjusted EBITDA for the fourth quarter and concerns over a confidential contract. Analysts from these firms express cautious optimism, noting Parsons’ strategic positioning and potential for long-term growth, especially in relation to federal spending.
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