SAIC: Future Cash Flows Will Support Upside Despite Revenue Headwinds

Analysts have trimmed their price target on Science Applications International to approximately $113.38 from $116.00. This reflects mounting concerns over weakening revenue momentum, multi year growth headwinds in a tougher federal funding backdrop, and heightened risk of a prolonged slowdown despite some resilience in profitability.

Analyst Commentary

Street research following the latest quarter reflects a more cautious stance on Science Applications International, with several firms cutting price targets and reassessing growth and execution assumptions. While views on valuation diverge, there is a common focus on the durability of revenue and margin trends in a shifting federal spending environment.

Bullish Takeaways

• Bullish analysts highlight that, despite muted top line prospects, the shares screen as an attractive value idea, with current multiples already discounting a slower growth profile.
• Some see room for upside if management can execute on cost reductions and efficiency initiatives, preserving or modestly expanding margins even as revenue softens.
• Supportive commentary around profitability guidance, including raised near term expectations, is viewed as evidence that SAIC can still generate healthy cash flows to underpin the equity story.
• A subset of investors views current policy and funding uncertainty as cyclical rather than structural, arguing that a normalization in federal priorities could enable a re rating if SAIC stabilizes its backlog and book to bill ratios.

Bearish Takeaways

• Bearish analysts emphasize a weakening revenue trajectory, noting organic declines and a reduced multi year outlook that point to a risk of prolonged top line contraction.
• There is concern that SAIC has struggled to generate on contract growth, with more scrutiny on scope additions and slower awards, raising questions around execution and competitive positioning.
• JPMorgan and Goldman Sachs flag the potential for a multi year revenue and margin slowdown as government priorities shift and funding reallocations take time to work through the system.
• Several research notes characterize the demand backdrop as sluggish, with policy uncertainty and stretched federal budgets limiting visibility, which in turn caps near term upside to valuation and justifies lower price targets.

What's in the News

• Won a $1.4 billion, five year COBRA task order to develop and integrate multi domain command and control technologies across the CJADC2 ecosystem, expanding SAIC’s role in modern warfighting architectures (client announcement).
• Awarded a $242 million, five year follow on contract from the Naval Undersea Warfare Center in Newport to operate, maintain and modernize the Navy’s Propulsion Test Facility supporting key torpedo and undersea systems programs (client announcement).
• Announced a strategic organizational restructuring effective January 31, 2026, consolidating five business groups into three and realigning the Chief Innovation Office to sharpen market focus and drive growth (business reorganization and legal structure change).
• The board appointed James (Jim) Reagan as interim chief executive officer effective October 23, 2025, following the departure of prior CEO Toni Townes Whitley. This adds an industry veteran with extensive defense and government services experience (executive change).
• Lowered fiscal 2026 revenue guidance to $7.25 billion to $7.325 billion and signaled mid single digit organic revenue declines in the back half of the year, underscoring headwinds to the top line despite ongoing share repurchases (corporate guidance and buyback update).

Valuation Changes

• Fair Value: Trimmed slightly to approximately $113.38 from $116.00, reflecting a modest reduction in the intrinsic value estimate.
• Discount Rate: Increased from about 7.95 percent to roughly 8.30 percent, indicating a somewhat higher perceived risk profile or required return.
• Revenue Growth: Assumed long term growth rate raised from roughly 1.04 percent to about 1.44 percent, suggesting a modestly more optimistic view on future top line expansion.
• Profit Margin: Forecast net profit margin increased from around 4.48 percent to approximately 4.83 percent, implying slightly better expected profitability.
• Future P/E: Target future price to earnings multiple reduced from about 15.66 times to roughly 14.55 times, signaling a more conservative valuation framework despite the updated growth and margin assumptions.