Stifel analyst Bert Subin reiterated a Buy rating on the shares of Booz Allen Hamilton Holding Corporation (NYSE:BAH) and raised the price target from $110 to $125.

The analyst assesses Booz Allen's artificial intelligence exposure and estimates potential annual sales from the company's primary AI contract callouts to be $200 million - $800 million a year.

If these contracts are deconstructed, one would find work unrelated to AI, which leads to the belief that pure AI sales are closer to the low-end of that range but AI-enabled sales are potentially even higher than the $764 million figure.

Looking at Booz's current AI job openings, the analyst sees a salary range of $73,100 - $275,000 as a rough low and high-end.

The primary way the analyst thinks Booz will benefit over the medium-term will be via AI-enabled contracts whereby the company is able to win because AI capabilities/staffing drive superior technical capability and potentially lower-cost.

Over the next 1-3 years, there will likely be added focus on bringing AI to agencies, which would allow Booz to leverage its software factory aiSSEMBLE, the analyst opined.

The company, according to the analyst, has been hiring AI-related talent for years (more on that below) and has developed a brand as the largest provider of AI services to the federal government.

The breadth of offerings should give the company a sizable pipeline of new opportunities, but the more promising near-term opportunity, in the analyst's view, will be capturing unused ceiling value on contracts.

BAH is looked at as perpetually expensive with an EBITDA multiple that tends to run multiple turns above the industry average, said the analyst.

However, the analyst added, the emergence of a burgeoning AI opportunity likely makes Booz's premium multiple deserved as the U.S. government looks to the next generation of technologies in a near-peer competitive landscape.

Price Action: BAH shares are trading higher by 0.53% at $112.84 on the last check Thursday.