We recently published a list of 10 Best Information Technology Services Stocks to Buy Right Now. In this article, we are going to take a look at where CACI International Inc (NYSE:CACI) stands against other best information technology services stocks to buy right now.
The U.S. is the powerhouse when it comes to technology and information technology services. The U.S. is well-placed to continue to dominate the technology space, as per AXA Investment Managers. The AI boom led the market rally in 2024, with the broader market soaring over 25% last year. Whereas, the NASDAQ-100 Technology Sector experienced a similar surge of just over 25% in 2024. Over the past five years, the index has returned more than 133% as tech companies continue to dominate the broader market.
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AXA Investment Managers mentioned that the guidance from tech companies amid the new products and services indicates earnings growth will remain healthy moving forward. According to the report from Research and Markets, the United States Information Technology Services market is estimated to be valued at $461.03 billion as of 2024 and is projected to reach $630.76 billion by 2029, growing at a CAGR of 6.47% between 2024 and 2029.
Analysts are revising price targets on IT service companies that are involved in government contracts. The Trump administration’s latest policies pose a threat to companies that are offering IT related services to various government departments. The Department of Government Efficiency (DOGE), which Elon Musk leads, has conducted a campaign to radically downsize the federal government and discontinue numerous agency employees. Musk’s actions are not received well by industry executives. DOGE recently ordered the dismantling of the U.S. Agency for International Development (USAID), raising concerns about the control of massive databases with sensitive information by DOGE. The department is also pushing for authorized access to IRS data systems right in the middle of the tax filing season. Musk-led department is also expected to target the Pentagon soon, pledging cost cuts.
Despite these short-term risks and department scrutiny, the U.S. tech sector is set to grow with the advancement of AI and its increasing daily use cases. Analysts identify several IT services stocks with massive upside potential.
Our Methodology
We used the Finviz screener to compile a list of Information Technology Services stocks with an analyst upside of more than 20% as of February 17. We have also added the hedge fund sentiment around the stocks, as of Q3 2024. The stocks are sorted in ascending order of their hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An IT technician in an open office with stacks of servers in the background.
CACI International Inc (NYSE:CACI)
Analyst Upside: 58.05%
No. of Hedge Fund Holders: 38
CACI International Inc (NYSE:CACI) offers expertise and technology solutions for national security across intelligence, defense, and federal civilian sectors. The company operates through Domestic and International segments, providing digital modernization, C4ISR, cyber, space, logistics, engineering, IT, and mission support solutions to government and commercial clients.
On January 23, Raymond James analyst Brian Gesuale elevated the price target on CACI shares from $475 to $490, keeping an Outperform rating on the shares. Gesuale cited that CACI International Inc’s (NYSE:CACI) shift towards a higher value technology offering, and transition from a portfolio that was historically 80% expertise, has led to a positive change in business mix. The analyst added that this has contributed to an approximate 200 basis point increase in EBITDA margin over the past eight years. Moreover, CACI’s recent performance backs this growth momentum.
Meridian Contrarian Fund remains highly bullish on the company, which is their largest holding. The fund cites its essential role in US defense IT infrastructure and consistent growth over a 10+ year investment period. It stated the following in its Q3 2024 investor letter:
“CACI International Inc (NYSE:CACI) is an IT consultant and provider of mission-critical technology to the U.S. Government and its agencies, which account for nearly 95% of its sales. CACI plays a vital role in modernizing IT infrastructure, systems, and other essential defense needs for the U.S. We have held CACI for over 10 years as the company has consistently grown into a larger supplier to the U.S., and increasingly, to our allies. The company’s stable growth and role as an essential provider of U.S. defense infrastructure were recognized by the market, delivering a solid return for shareholders in the quarter. We maintained our position throughout the period and, as of quarter-end, CACI was the Fund’s largest holding.”
Overall, CACI ranks 2nd on our list of best information technology services stocks to buy right now. While we acknowledge the potential of CACI to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CACI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
