The Edward Snowden fiasco has brought cyber security issues back into the news and onto the plates of those in Congress or the Federal government – a trend which will clearly benefit SAIC, Inc. (NYSE: SAI), otherwise known as Science Applications International Corporation (SAIC). That’s one reason why we recently re-added SAIC, Inc. to our SmallCap Network Elite Opportunity (SCN EO) portfolio after making a 17% gain on it when we held it earlier this year. However, there are plenty of other reasons beyond the Edward Snowden affair for investors to like SAIC, Inc.
What is SAIC, Inc.?
Founded by J. Robert Beyster, Ph.D. and a small group of scientists in 1969, SAIC, Inc. provides scientific, engineering and technology applications to solve mission-critical problems in national security, energy & environment, health and cyber security. SAIC, Inc. has approximately 40,000 employees serving customers in the U.S. Department of Defense, the intelligence community, the U.S. Department of Homeland Security, other U.S. Government civil agencies and selected commercial markets.
More specifically, SAIC, Inc. says it provides customers with defensible security strategies and practical solutions to address complex cyber challenges and that it’s the leader in the integration of technology, systems and operational solutions across intelligence disciplines in all domains (air, land, sea and space).
What’s There to Like or Dislike About SAIC, Inc.?
In the latter half of the fiscal year, SAIC, Inc. plans to split into two independent, publicly traded companies – basically a government services company that will retain the SAIC name and a technology company that will be called Leidos which some view as the current SAIC's more growth-oriented operation as its geared toward national security, health and engineering. These areas account for about 65 percent of SAIC’s revenue. The planned split is also viewed as a smart move because it will allow the two separate companies to bid on more contracts and eliminate potential conflicts of interest that might otherwise prevent it from winning some contracts.
However, it should be noted that the smaller company which will have the SAIC name, will focus on information technology and services. These are areas where many federal contractors have suffered big declines in revenue in recent years and is expected to get hardest hit by budget cuts in the near term. With that said, there is still potential in enterprise IT and services over the long term and in areas like higher-capacity cloud computing.
Bloomberg has recently reported that SAIC, Inc. made $3.7 billion last year alone on doing intelligence work for the US government. Moreover, it was noted that its not just the US government spending money on cyber security initiatives as the NSA and Amazon.com inevitably end up buying some of the same hardware or software.
Nevertheless and earlier this month, SAIC, Inc. did report $2.71 billion in revenue verses $2.76 billion for the same period last year along with net income of $81 million verses $117 million. The decline was blamed on tightening government budgets, but the company's backlog of signed business orders at the end of the first quarter stood at $16.5 billion (of which $4.7 billion was funded) and guidance for the year was reaffirmed.
With that said, SAIC, Inc. has been reporting a steady flow of new contract wins, including the following newly awarded contracts over the past month or so:
Stock Performance: SAIC, Inc.
On Wednesday, SAIC, Inc. rose 3.43% to $13.56 (SAI has a 52 week trading range of $10.69 to $15.60 a share) for a market cap of $4.64 billion plus the stock is up 22.3% since the start of the year, up 14.3% over the past year and down 33.6% over the past five years:
Investors who are technicians or traders should also take a look at the latest technical chart for SAIC, Inc.:
The Bottom Line. Again, our SmallCap Network Elite Opportunity (SCN EO) portfolio made 17% off of SAIC, Inc. earlier this year and it look like there is a good chance to make some more money off the stock this year.