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 Parsons Corporation (NYSE:PSN) 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 satellite navigating the skies, representing the power of the companies Geospatial Solutions.
Parsons Corporation (NYSE:PSN)
Analyst Upside: 49.06%
No. of Hedge Fund Holders: 30
Parsons Corporation (NYSE:PSN) offers solutions and services for the security environment, unprecedented global infrastructure demand, and digital transformation. The company operates through two segments including Federal Solutions and Critical Infrastructure. The company’s digital solutions are focused on aviation, rail and transit, bridges, roads, and highways, leveraging sensors and data to drive smart sustainable infrastructure.
On January 24, Jefferies analyst Sheila Kahyaoglu lowered the price target on PSN shares from $110 to $100, keeping a Buy rating on the stock. The analyst downgraded the price target on PSN due to the “elevated risk” from the Department of State Humanitarian contract. However, the company will not miss $550 million or 8% of its sales due to the absence of the contract.
Parsons Corporation (NYSE:PSN) recorded a remarkable growth in the 2023-2024 period, with a 23% organic growth. The company’s performance is expected to slow down in the 2025-2026 period, with organic growth dropping to only 5%. The company is well-positioned and benefits from high government infrastructure spending in America, in addition to its initiatives in the Mideast. Parsons has reflected strong performance with revenue growth of just under 29% in the last twelve months, reaching $6.51 billion. On average, analysts expect Parsons Corporation’s (NYSE:PSN) EPS to rise to $3.93 in 2025 from $3.40 in 2024.
Overall, PSN ranks 4th on our list of best information technology services stocks to buy right now. While we acknowledge the potential of PSN 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 PSN 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.