Markets are seeing the Department of Government Efficiency as a headwind for defense stocks across the board.
But a handful of them actually stand to benefit from DOGE’s push to cut costs and make the federal government more efficient, according to Bank of America analyst Mariana Perez Mora.
These include Booz Allen Hamilton Holding Corporation and Palantir Technologies Inc. Here’s what each of these two have in store for investors in 2025.
Booz Allen Hamilton Holding Corporation (NYSE: BAH)
Perez Mora is bullish on Booz Allen Hamilton as she’s convinced the modernization of defense IT is currently in the “early innings of a long-term up-cycle.”
The Bank of America analyst, therefore, expects the sector to sustainably grow by high single-digit percentages in the near term.
She likes BAH in particular within the defense IT space as it has been “agile to adapt to the US government’s increasing willingness to work with commercial off-the-shelf solutions.”
BofA currently rates Booz Allen Hamilton stock as a “buy”. Its $210 price target indicates potential for about a 75% upside in shares of the McLean headquartered firm from current levels.
Perez Mora finds the New York-listed firm attractive also because it has tanked rather significantly from a high of $186 in late October to $121 at writing.
BAH continues to sink even though it reported better-than-expected results for its third financial quarter last week. In the earnings release, Horacio Rozanski, the company’s chief executive told investors:
Booz Allen is the advanced technology company driving speed to outcomes. We’re well-positioned and excited to help accelerate our clients’ mission in today’s complex environment.
Note that Booz Allen Hamilton pays a dividend yield of 1.82% as well, which makes it all the more attractive to own.
Palantir Technologies Inc (NASDAQ: PLTR)
Palantir stock has already grown nearly five-fold in the trailing 12 months but the Bank of America analyst remains convinced that it still has more room to the upside.
Perez Mora expects PLTR to benefit from the Department of Government Efficiency’s efforts since it’s committed to “operationalizing data, establishing high-fidelity digital enterprise-twins, and accelerating decision making.”
Her “buy” rating on Palantir shares is coupled with a $125 price target that indicates potential for another 10% upside from current levels.
The BofA analyst recommends owning PLTR because:
AI and data analytics are critical to timely and informed decision making – from cutting duplicative contracts, to improved logistics, to autonomous systems, to command, control, and communications on the battlefield.
Last week, the Denver headquartered firm reported its financial results for the fourth quarter that handily topped Street estimates.
Unlike BAH, however, Palantir stock is not a suitable pick for income investors as it does not currently pay a dividend.
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