Science Applications stock price target lowered to $128 by Stifel

Science Applications International Corp (SAIC) reported mixed Q2 FY2026 results, with a significant EPS beat ($3.63 vs. $2.24 expected) but a revenue miss ($1.77B vs. $1.87B expected), raising investor concerns about future guidance. Despite this, Stifel maintained a Buy rating while slightly lowering its price target to $128 from $130. Stifel's continued positive outlook is driven by SAIC's strong free cash flow guidance, which received a mid-single-digit upgrade, and an attractive valuation at current levels (9x and 8x current/next year FCF), offsetting the downgraded revenue outlook due to persistent market challenges.

Analysis

Science Applications International Corp. (SAIC) presents a mixed financial profile following its Q2 FY2026 report, which revealed a significant divergence between profitability and top-line growth. The company delivered a notable 62.05% earnings per share surprise, posting $3.63 versus a $2.24 consensus, but simultaneously reported a 5.35% revenue shortfall at $1.77 billion against an expected $1.87 billion. In response, Stifel maintained its Buy rating but trimmed its price target to $128 from $130, acknowledging the downgraded revenue outlook caused by persistent market challenges. Stifel's investment thesis remains centered on a compelling value proposition, supported by a mid-single-digit percentage upgrade to SAIC’s free cash flow guidance. At a stock price of approximately $108, the valuation is attractive, with the market pricing current and next year free cash flow at just 9x and 8x, respectively. This strong cash flow profile, combined with a low beta of 0.49 indicating lower-than-market volatility, underpins the view that SAIC is an 'attractive value stock' despite the evident revenue headwinds.

Key Decisions for Investors

• Value-focused investors may find the current valuation compelling, given the low free cash flow multiples of 9x and 8x, which Stifel highlights as a key support for its Buy thesis.
• Investors should closely monitor future revenue guidance and performance, as the 5.35% revenue miss represents the primary risk factor offsetting the strong EPS beat and upgraded cash flow outlook.
• Consider the stock's defensive characteristics, such as its low beta of 0.49, which may appeal to portfolios seeking to mitigate broader market volatility, though this does not remove company-specific risks.
• The core investment decision involves weighing the company's demonstrated profitability and strong cash generation against its clear challenges in achieving top-line growth.