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 Leidos Holdings, Inc. (NYSE:LDOS) 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).
A close-up of an engineer working on the development of a new air navigation system.
Leidos Holdings, Inc. (NYSE:LDOS)
Analyst Upside: 24.75%
No. of Hedge Fund Holders: 34
Leidos Holdings, Inc. (NYSE:LDOS) develops smarter technology solutions, particularly for customers in highly regulated industries. The company’s services are utilized across the defense, intelligence, civil, and health markets. The company serves the US government, international allies, and commercial clients.
Leidos Holdings, Inc.’s (NYSE:LDOS) National Security segment experienced 5.5% year-over-year growth in Q4 2024. Although the segment’s profit margin dropped slightly during Q4 due to project variations, its full-year margin exceeded expectations. The company expects its profit margin to continue the growth momentum in this segment. For 2025, the company anticipates its total revenue to increase by 4% year-over-year, reaching between $16.9 billion and $17.3 billion.
On February 12, Wells Fargo analyst Matthew Akers slightly downgraded the price target on LDOS shares from $199 to $197, maintaining an Overweight rating on the shares. Akers expects an upside to Leidos’ 2025 outlook for both top line and margins.
Overall, LDOS ranks 3rd on our list of best information technology services stocks to buy right now. While we acknowledge the potential of LDOS 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 LDOS 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.
