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On Monday, Baird initiated coverage on Karman Holdings Inc (NYSE: KRMN), assigning the stock an Outperform rating and setting a price target of $40.00, representing significant upside from the current trading price of $28.78. The stock has faced recent pressure, declining nearly 14% over the past week according to InvestingPro data. The firm’s analyst highlighted Karman Holdings’ unique business model that offers customers comprehensive services from concept to production, ensuring early involvement in leading weapon programs before initial prototyping stages.
Karman Holdings’ financial performance is underscored by its revenue growth and EBITDA of $95.34 million in the last twelve months. While the company maintains healthy gross margins of 38.5% and a strong current ratio of 1.87, InvestingPro analysis reveals additional metrics that subscribers can access to make informed investment decisions. These metrics are seen as particularly compelling by Baird, as they reflect the company’s potential for sustained growth.
The analyst’s outlook for Karman Holdings is further bolstered by the company’s focus on hardware, which is considered to be insulated from the volatility associated with cryptocurrencies like Dogecoin (DOGE). This aspect of the business, referred to as "DOGE-proof," is viewed positively in the context of the analyst’s optimistic perspective on small to mid-cap Defense Technology stocks for the year 2025 and beyond. However, InvestingPro’s Financial Health Score indicates some concerns, with the company receiving a weak overall rating of 1.4 out of 5.
The price target of $40.00 set by Baird is based on a multiple of 30 times the firm’s estimated EBITDA for Karman Holdings in 2027. With a current market capitalization of $3.8 billion and an EV/EBITDA multiple of 44.46x, the company’s current valuation metrics suggest it may be trading above its Fair Value, according to InvestingPro’s analysis. This valuation reflects confidence in the company’s ability to maintain its strong financial metrics and capitalize on its early involvement in significant weapon programs.
Karman Holdings’ positioning within the defense technology sector, combined with its solid financial metrics, underpins Baird’s Outperform rating. The company’s differentiated approach to customer engagement and product development is expected to continue driving its success in the competitive defense market.
In other recent news, Karman Holdings’ initial public offering (IPO) opened at $30, significantly exceeding its initial pricing set at $22. The company offered 23 million shares, with 8,421,053 shares of common stock and additional shares provided by selling stockholders, surpassing initial expectations. The IPO was managed by Citi, Evercore ISI, RBC Capital Markets, William Blair, and Baird as joint bookrunners. RBC Capital Markets also initiated coverage of Karman Holdings with an Outperform rating and a price target of $35. This rating reflects the company’s involvement in over 100 national security and space programs, which supports an 18% outlook for organic growth and nearly 30% adjusted EBITDA margins. Karman Holdings’ position in the market is bolstered by the scarcity of quality small to mid-cap defense stocks, potentially attracting investor interest. The $35 price target is based on a 32 times multiple of the firm’s 2026 EBITDA estimate of $151 million. These developments provide investors with insights into Karman Holdings’ market potential and financial outlook.
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