Bank of America sees these 2 under-the-radar defense stocks benefitting from Musk’s DOGE efficiency push

Booz Allen Hamilton and L3Harris Technologies are poised to benefit from Elon Musk’s Department of Government Efficiency’s efforts to trim down federal spending, according to Bank of America. Bank of America reiterated its buy rating on both stocks. Its price target of $210 on Booz Allen implies upside of more than 62%. from Monday’s close. The bank also sees 24% upside on L3Harris shares, with a price target of $265. Defense shares have broadly dipped following President Donald Trump’s inauguration on fears that federal government spending reductions will hurt the sector. The SPDR S & P Aerospace and Defense ETF (XAR) is down around 3.4% from its high on Jan. 24. Despite the recent pullback in defense stocks, analyst Mariana Perez Mora thinks such worries are “largely overdone.” Mora said the sell-off provides an opportunity for investors to buy into the space, particularly into Booz Allen Hamilton. “We see BAH as a beneficiary of a focus on efficiencies should DOGE initiatives be implemented. Leveraging on a strong combination of technical expertise and customer intimacy, BAH could play a critical role advising on tech & specialized fields and enabling efficiencies through tech adoption and modernization,” Mora wrote in a Tuesday note. Booz Allen Hamilton shares are off to a solid start for 2025, up 3.5%. That gain outpaces the S & P 500’s 2.5% advance at the start of the year. However, the stock has fallen more than 25% over the past 12 months. Analysts overall are split on the stock. LSEG data shows seven of the 14 who cover Booz Allen rate it a buy or strong buy, while the rest rate it as a hold or underperform. As for L3Harris, fellow BofA analyst Ronald Epstein thinks it’s “well positioned to move quickly and adapt to new policy changes given their engagement with the agency.” L3Harris shares are up slightly to start the year, but they have fallen more than 14% over the past two months. Analysts are mostly bullish on the stock, with 17 of 24 who cover L3Harris rating it a buy, according to LSEG. —CNBC’s Michael Bloom contributed to this report.