Science Applications International Corp (NASDAQ:SAIC)’s share price imploded following Donald Trump’s election to the U.S. Presidency and is now offering a screaming hot entry for investors.
The implosion was caused by uncertainty surrounding the company’s primary revenue source, government spending.
Those fears, however, have proven to be unfounded, leaving the stock in a deep-value situation.
Down roughly 35% from their 2024 highs, the market confirmed its bottom following the Q1 2025 earnings release, and there are numerous reasons to expect a robust rebound over the coming quarters.
Among them are the company’s cash flow and capital return. At face value, the dividend is attractive enough with its 1.4% yield and 16% payout ratio, but the share buybacks compound it. The share buybacks are both aggressive and sustainable, with total capital return supported by a favorable free cash flow payout ratio.
The critical detail is that buybacks reduced the count by an average of 8.25% in FQ1 2026 and will sustain the pace through year’s end. The F2026 includes a forecast for roughly $375 million in buybacks, or about 7.6% of the market cap, with shares trading at long-term lows.
SAIC Falls After Solid Report, Cautious Guidance
Despite alleviating market fears and improving visibility, SAIC shares failed to retest their long-term lows following the Q1 release. The company generated $1.88 billion in net revenue, representing a 1.6% increase over last year, edging past the consensus figure slightly.
The growth is supported by new contract wins offset by completions, with internal metrics suggesting the guidance is cautious.
The only bad news is that margin contraction was worse than expected; however, there is a mitigating factor. Contract turnover and payment timing, some of which were delayed due to procedural or staffing changes at government agencies, impacted the figure. Adjusting for them, the margin and earnings were better than expected.
The guidance is good, and there is a high probability of outperformance. The company reiterated its outlook for 2.5% organic growth, with revenue expected to be $7.6 to $7.75 billion for the year. The guidance could be cautious due to the accelerating momentum in contract wins, the number of contracts awarded since the end of the quarter, and the favorable book-to-bill ratio. At 1.3, new business is growing at a 30% faster rate than completed projects, there are billions in unawarded but submitted contracts still in play, and the company plans to submit billions in additional proposals by the end of the year.
It is negligible regarding the impact of DOGE and government spending changes on the outlook. CEO Toni Townes-Whitley says the effects of DOGE are about 1%, but are offset by business wins and the outlook for government spending.
The budget proposal submitted by the White House aligns with the company’s growth trajectory and includes a focus on some of SAIC’s critical business segments, including the NAVY, Air Force, and Space Development Agency. The takeaway is that Science Applications International is well-positioned as a source of IT services and support.
Science Applications International Indicated 20% Higher by Analysts
The analysts’ response to SAIC’s results and guidance is mixed, but the trends favor higher share prices. MarketBeat tracked three revisions within the first few days of the release, including two price target reductions and one increase. The reductions place the market in the range of $100 to $120, aligning with the technical price floor and a roughly 20% upside.
Meanwhile, the increase is to $137, representing more than 30% upside from the early June lows. Together, their average aligns with the consensus, which forecasts a 20% increase and has been relatively stable for the last year. Regarding the trends, analysts’ coverage is increasing, and sentiment is improving, shifting from Reduce to Hold over the previous 12 months.