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CACI International (NYSE:CACI) on Tuesday was upgraded to Overweight from an investment rating of Equal weight by analysts at Morgan Stanley. They said the defense-technology company is poised to benefit from increased federal spending on cybersecurity.
“Given upward potential in relative valuations as well as the Department of Defense focus on high-end capabilities, we are resetting our multiples and ratings to place emphasis on revenue growth and market positioning,” Matthew Sharpe, analyst at Morgan Stanley, said in a Jan. 3 report. “CACI (CACI) continues to trade at or below the group on valuation.”
The stock may see additional upside if it receives favorable rulings on more than $8 billion from two defense contracts that competitors have protested, according to Morgan Stanley.
CACI (CACI) last year was awarded a 10-year, $5.7 billion contract by the U.S. Air Force for enterprise IT as a service, a decision that rival bidders Accenture (ACN), Peraton and Science Applications International (SAIC) protested.
CACI (CACI) also was awarded a $2.4 billion contract from the National Security Agency for what is known as FocusedFox for computer network security. Booz Allen Hamilton (BAH) and Leidos (LDOS) objected to the award in protests filed with the Government Accountability Office.
Morgan Stanley raised its price target on CACI (CACI) to $355 a share from $325 previously, based on a higher multiple of 13 times estimated EBITDA for 2023.
The bank also downgraded SAIC (SAIC) to Equal weight from Overweight, and Parsons (PSN) to Underweight from Equal weight.
CACI (CACI) last year rose about 11%, contrasting with a 15% decline for the Standard & Poor’s 400 midcap index (SP400).
Seeking Alpha columnist Peter F. Way rates CACI (CACI) as a Buy on market technicals.