Issue #8

Where Smart Money Is Flowing: Defense, AI & Cybersecurity Picks

Hey Traders,

Markets are shifting, and so are the opportunities. In today’s environment, investors are no longer chasing hype—they’re looking for strategic positions in sectors with real staying power. Defense spending is climbing on the back of long-term government contracts. Artificial intelligence is driving a structural shift in enterprise technology. And cybersecurity is no longer optional—it’s a necessity as companies race to protect digital infrastructure.

In this edition, we’ll break down three companies that represent the core of these megatrends:

• Parsons (PSN): Stable growth powered by defense contracts and critical infrastructure.
• Dell Technologies (DELL): A technology giant turning AI demand into record-breaking growth.
• Okta (OKTA): A cybersecurity leader entering a new phase of profitable expansion.

Each of these names offers a unique investment angle—whether you’re seeking low-risk stability, AI-fueled upside, or high-growth tech just turning the corner. Let’s dive in.

Parsons Corporation (NYSE:PSN)

Parsons Corporation is a global provider of technology-driven solutions for the defense, intelligence, and critical infrastructure markets. The company operates primarily through two segments: Federal Solutions and Critical Infrastructure.

Business Model and Revenue Streams

Parsons' business model focuses on leveraging its technical expertise and innovative solutions to secure and execute large-scale, long-term contracts with government agencies and private sector clients. Its revenue streams are diversified across multiple sectors, but primarily fall into two core segments:

• Federal Solutions: This segment provides mission-critical services and technology solutions to U.S. government agencies, including cybersecurity, missile defense, intelligence, and electronic warfare.
• Critical Infrastructure: This segment provides engineering, program management, and construction management for roads, bridges, transit systems, and smart mobility projects globally.

Recent Performance and Corporate Developments

Parsons reported strong results for the second quarter of 2025, beating earnings per share (EPS) forecasts despite a slight revenue miss.

Q2 2025 Financial Highlights: 💰

• Total Revenue: Parsons reported $1.58 billion in total revenue, a 5% decrease year-over-year. However, excluding the impact of a confidential contract, revenue increased by 13%, with organic growth of 8%.
• Net Income & EBITDA: Net income for the quarter was $55 million. Adjusted EBITDA decreased by 1% to $149 million, but the adjusted EBITDA margin expanded by 40 basis points to a record 9.4%, a sign of strong operational efficiency.
• Backlog & Book-to-Bill: The company’s funded backlog reached its highest level since its IPO, growing to $8.9 billion. The quarterly book-to-bill ratio was 1.0x, continuing a streak of 1.0x or greater since the IPO, indicating that new contracts are being awarded at a rate that at least matches the rate at which existing contracts are being completed.

Strategic Initiatives and Mergers: 🤝

• Parsons completed the strategic acquisition of Chesapeake Technologies International (CTI) in July 2025, which enhances its capabilities in the electromagnetic spectrum, a key area for defense and intelligence.
• The company continues to win significant contracts, including a C5ISR (Command, Control, Computers, Communications, Cyber, Intelligence, Surveillance and Reconnaissance) radar contract with the Army DEVCOM and a joint venture with Versar for a $75 million U.S. Army Corps of Engineers contract.

Path to Profitability and Fair Value

Parsons is already a profitable company, and its path to continued growth and profitability hinges on its ability to leverage its backlog, win new contracts, and successfully integrate its acquisitions. The company's focus on high-margin, technology-driven solutions support its profitability trajectory.

Given that Parsons is a profitable and well-established company, traditional valuation metrics can be applied. The stock has a trailing Price-to-Earnings (P/E) ratio of approximately 23.2 and an enterprise value to EBITDA of 17.8. While its valuation is not low, it reflects the company's consistent growth, strong backlog, and positive long-term outlook.

Analyst Estimates and Ratings

The analyst community generally holds a bullish outlook on Parsons' stock.

• Consensus Rating: The consensus analyst rating is a "Buy" or "Strong Buy."
• Price Target: The average 12-month price target is approximately $87.00, with a high estimate of $95.00 and a low of $80.00. The targets are based on the expectation that the company will continue to secure new contracts and execute its strategic growth plan effectively.

Investor-Focused Takeaway: Is PSN Right for Your Portfolio?

Parsons is a stable and growing investment in the cybersecurity and infrastructure space, backed by strong government spending. Its consistent performance, robust backlog, and strategic acquisitions make it an attractive option for investors looking for long-term growth. While the stock's valuation is not cheap, it's justified by its strong fundamentals and future growth potential.

What to Watch in the Near Term: 📈

• Contract Awards: Keep an eye out for news on major new contract wins, as they directly impact the company’s backlog and future revenue.
• Margin Expansion: Continue to monitor the company's adjusted EBITDA margins to ensure its profitable growth remains on track.
• Acquisition Integration: Watch for updates on how well the company integrates its recent acquisitions and how they contribute to overall performance.

Recommendation:

With a "Buy" consensus from analysts and compelling price targets, PSN appears to be a solid investment. However, investors should be mindful of the risks associated with government budgetary cycles and geopolitical events. Furthermore, a high-interest-rate environment can increase the cost of capital for both Parsons and its clients.

Dell Technologies (NYSE:DELL)

Dell Technologies is a global leader in providing end-to-end technology solutions. The company's business model is built on a direct-to-customer approach and is organized into two main segments: Client Solutions Group (CSG) and Infrastructure Solutions Group (ISG).

Business Model and Revenue Streams

Dell's business model is a blend of hardware and services, giving it diversified revenue streams.

• Client Solutions Group (CSG): This segment generates revenue from the sale of consumer and commercial products such as laptops, desktops, and workstations. The commercial side provides a more stable revenue stream from large corporate and government clients.
• Infrastructure Solutions Group (ISG): This is the high-growth engine of the company, focusing on enterprise-level solutions. Revenue is driven by the sale of servers, storage systems, and networking equipment.
• Services & Financing: Beyond hardware sales, Dell earns recurring revenue through support services for its products.

Recent Performance and Corporate Developments

Dell has recently posted strong financial results, driven primarily by its enterprise business.

Q2 2025 Financial Highlights: 💰

• Total Revenue: Dell reported a record Q2 revenue of $29.8 billion, a substantial 19% increase year-over-year. This growth was fueled by exceptional demand for its AI servers.
• Segment Performance: The ISG segment was the standout performer, with revenue jumping 44% year-over-year to a record $16.8 billion. This was led by a 69% surge in its servers and networking business. The CSG segment was largely flat, showing a modest 1% growth.
• Profitability: The company reported a strong earnings per share (EPS) of $9.55, topping Wall Street estimates of $9.38 per share.

Corporate Developments: 🤝

• Dell has been actively expanding its AI partnerships and product offerings. The company announced a strategic partnership with Ericsson to accelerate telecom network cloud transformation and is collaborating with NVIDIA on next-generation enterprise AI solutions.
• The company has also initiated cost-cutting measures, which included some layoffs, aimed at improving efficiency and focusing on high-growth areas.

Path to Profitability and Fair Value

Dell is a highly profitable company, and its strategic focus is on optimizing margins and capitalizing on the AI revolution.

Path to Profitability: Dell's long-term profitability depends on its ability to maintain its market leadership in the high-growth AI server and storage space. The company's strong backlog and pipeline for AI servers suggest a clear path to sustained top-line growth and increased profitability.

Fair Value: Dell's stock is trading at a trailing Price-to-Earnings (P/E) ratio of approximately 18.44. Given its strong growth trajectory and pivot toward high-margin AI solutions, this valuation appears fair and potentially undervalued. The market's recent reaction to the company's outlook highlights the high expectations for its AI business.

Analyst Estimates and Ratings

The analyst community is largely bullish on Dell's prospects.

• Consensus Rating: The consensus rating from analysts is a "Strong Buy" or "Buy."
• Price Target: The average 12-month price target is approximately $147.73, with some analysts providing a target as high as $176.95.

Investor-Focused Takeaway: Is DELL Right for Your Portfolio?

Dell is a compelling investment for those looking for exposure to the enterprise technology and AI sectors. The company's impressive Q2 results and its dominant position in the AI server market underscore its strong fundamentals. The stock's valuation appears reasonable given its growth profile.

What to Watch in the Near Term: 🔬

• AI Server Demand: Dell said that it now plans to ship $20 billion of artificial intelligence servers in its fiscal 2026, double what it sold last year. Monitor the company's future guidance on AI server shipments and backlog.
• Profitability: Keep an eye on the margins of its Infrastructure Solutions Group. While revenue growth is strong, maintaining or expanding profitability will be key to long-term value creation.

Recommendation:

Analysts have a "Strong Buy" rating on DELL with significant price targets, suggesting the market is not yet fully pricing in its potential. While the stock may experience short-term volatility due to margin concerns, its strategic shift and leadership in the AI space make it a strong long-term growth play. Investors should be aware that the Interest rates play a crucial role, as higher rates can increase the cost of financing for both Dell and its business customers.

Okta (NASDAQ:OKTA)

Okta is a leading provider of identity and access management (IAM) solutions. The company's core business revolves around enabling secure and seamless access for employees and external customers and partners. Okta operates on a Software-as-a-Service (SaaS) model, generating revenue primarily through subscriptions.

Business Model and Revenue Streams

Okta's business model is built on two primary product segments:

• Workforce Identity Cloud: This segment’s key products include Single Sign-On (SSO), Multi-Factor Authentication (MFA), and lifecycle management. This helps organizations enhance security, streamline IT operations, and enforce a Zero Trust security model.
• Customer Identity Cloud (Auth0): Acquired in 2021, this segment (formerly Auth0) allows developers to build secure, seamless, and customizable identity experiences for their own customer-facing applications.

Okta's revenue is predominantly subscription-based, which provides a predictable and recurring stream of income. The company also generates a small portion of revenue from professional services, such as implementation and training.

Recent Performance and Corporate Developments

Okta delivered a strong second quarter of fiscal year 2026, exceeding analyst expectations.

Recent Quarter Financial Highlights: 💰

• Total Revenue: Total revenue was $728 million, representing a 13% increase year-over-year and beating consensus estimates.
• Subscription Revenue: Subscription revenue grew by 12% year-over-year to $711 million.
• Profitability: The company reported a GAAP operating income of $41 million, a significant improvement from the loss reported in the same quarter last year.
• For the full year fiscal 2026, the Company expects total revenue of $2.875 billion to $2.885 billion, representing a growth rate of 10% to 11% year-over-year.

Strategic Initiatives and Mergers: 🤝

• Okta recently completed the acquisition of Axiom Security in September 2025 to bolster its capabilities in Privileged Access Management (PAM). This acquisition strengthens its security portfolio and allows it to compete more effectively with specialized vendors.
• The company is also strategically focused on integrating AI-driven security features into its platform, a key growth driver in the evolving cybersecurity landscape.

Path to Profitability and Fair Value

Okta has successfully transitioned to GAAP profitability in recent quarters, a significant achievement for a growth-oriented SaaS company. Its path to sustained profitability relies on continued revenue growth, expanding gross margins, and disciplined spending. The company's strong cash flow and balance sheet, with approximately $2.86 billion in cash and investments, give it the flexibility to invest in growth and manage its operations without significant debt.

Given its recent profitability, traditional valuation metrics like the P/E ratio are becoming more applicable. A discounted cash flow (DCF) analysis by analysts suggests the stock is currently undervalued compared to its future cash flow potential.

Analyst Estimates and Ratings

The analyst community is largely positive on Okta's long-term prospects.

• Consensus Rating: Twenty two analysts have a rating of "Buy" on OKTA while Thirteen analysts have "hold" rating on the stock.
• Price Target: The average 12-month price target is approximately $120.68, with a high target of $148.00. This implies a substantial upside from its current trading price, based on the assumption that Okta will continue to capture market share and execute on its strategic plan.

Investor-Focused Takeaway: Is OKTA Right for Your Portfolio?

Okta presents a compelling investment opportunity in the cybersecurity space. The company's recent profitability, robust financial performance, and strategic acquisitions in high-growth areas like PAM and AI-driven security position it for continued success. While the stock has faced some volatility in the past, its core business remains strong and is benefiting from long-term trends in digital transformation and security.

What to Watch in the Near Term: 🔬

• Customer Acquisition: Monitor the growth in the number of large customers ($100,000+ in annual contract value) as this indicates the company's ability to "land and expand" within the enterprise market.
• Integration of Axiom: Watch for updates on how the recent acquisition of Axiom Security is integrated and how it contributes to Okta's revenue and competitive positioning.
• Market Share: Keep an eye on the competitive landscape, particularly how Okta is faring against large competitors like Microsoft and other specialized identity vendors.

Recommendation:

Analysts have a mixed "Buy" and “Hold” rating on OKTA, with significant price targets, indicating a belief that the company's recent performance and strategic direction are not yet fully reflected in its current stock price.

Talking about the risks, as a cybersecurity company, Okta's business is relatively resilient to economic downturns, as security spending is often considered a non-discretionary expense for businesses. However, a high-interest-rate environment can make it more expensive for Okta's clients to secure financing for large IT projects, potentially leading to slower sales cycles or contract deferrals.

A Final Word on Your Investment Decision

Your decision should align with your investment horizon and risk appetite. Each company has a compelling story—choosing the right one depends on what kind of growth you're looking for.

Parsons (PSN), Dell Technologies (DELL), and Okta (OKTA) represent three distinct investment opportunities across defense, AI infrastructure, and cybersecurity. Each has a unique business model, growth outlook, and risk profile—offering investors flexibility depending on their strategy and risk tolerance.

• Parsons (PSN) – Stable growth through government contracts and critical infrastructure.
  ​ ✔ Strong $8.9B backlog and consistent 1.0x+ book-to-bill ratio
  ✔ Margin expansion and operational efficiency
  ✔ Strategic acquisitions (e.g., CTI) enhancing defense tech offerings
  ➤ Best for: Conservative investors seeking steady growth and contract-driven revenue
  ​
• Dell Technologies (DELL) – AI-driven transformation with strong enterprise demand.
  ​ ✔ ISG revenue up 44% YoY, driven by AI server demand
  ✔ Strong partnerships with NVIDIA and Ericsson
  ✔ EPS beat and fair valuation (~18.4x P/E)
  ➤ Best for: Growth investors looking for exposure to enterprise tech and AI
  ​
• Okta (OKTA) – Cybersecurity leader entering profitable growth phase.
  ​ ✔ Returned to GAAP profitability with strong subscription revenue
  ✔ Strategic acquisition of Axiom Security strengthens product suite
  ✔ Significant upside potential with $120+ average price target
  ➤ Best for: Investors seeking high-growth SaaS with improving fundamentals
  ​

Investor Insight:

• Low-risk, stable growth? → Parsons
• AI-fueled upside with solid fundamentals? → Dell
• High-growth cybersecurity with emerging profitability? → Okta

Your decision should align with your investment horizon and risk appetite. Each company has a compelling story—choosing the right one depends on what kind of growth you're looking for.

We’ll be back with our next report soon, bringing you fresh insights on the market and new opportunities to watch. In the meantime, we’d love to hear from you—let us know how you found this report, what niche sectors you’d like us to cover next, and don’t forget to share your top stock holdings with us. Your feedback helps us deliver reports that matter most to your investing journey.

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Happy Trading
​— Team Premium Stock Alerts