Cantor Fitzgerald sees GovTech, Space stocks up on DoD/DHS bill

Published 29/04/2025, 14:00
Cantor Fitzgerald sees GovTech, Space stocks up on DoD/DHS bill

On Tuesday, Cantor Fitzgerald released a note indicating that the recent reconciliation bill proposed by the House Armed Services Committee, which includes approximately $150 billion in additional spending for the Department of Defense (DoD) and Department of Homeland Security (DHS) for fiscal year 2025, could be a significant growth driver for companies in the Government Technology (GovTech) and Space sectors. According to InvestingPro data, companies in this sector are already showing strong momentum, with some players reporting revenue growth exceeding 57% in the last twelve months. InvestingPro subscribers can access detailed sector analysis and growth forecasts for over 1,400 companies in their comprehensive Pro Research Reports.

The analyst pointed out that the supplemental spending represents an approximate 16% increase compared to the total DoD/DHS spending, which has seen a compound annual growth rate (CAGR) of about 5% over the past three years. When compared more directly to the FY25 Modernization budget of $310 billion, the growth could represent a nearly 47% increase, which is significantly higher than the 16% CAGR observed over the same period. InvestingPro analysis reveals that some defense technology companies are projected to see revenue growth of up to 341% in the coming fiscal year, aligning with this broader sector expansion.

Cantor Fitzgerald suggests that this additional spending could support a multi-year growth environment of around 10%, with the potential for acceleration in fiscal years 2026 and 2027 due to the nature of outlay mechanics and varying growth outcomes based on program exposure. The firm anticipates the budget specifics to reveal distinct beneficiaries, including sectors like shipbuilding, missile defense, munitions, and digital technologies. For investors seeking to capitalize on these opportunities, InvestingPro’s Portfolio Ideas offers curated defense sector investments backed by comprehensive financial analysis and real-time market insights.

The analysis of budget specifics against the FY25 Modernization request reveals potential three-year growth rates in key areas such as shipbuilding at 19%, missile defense at 18%, and missiles and munitions at 28%. However, the firm notes that these comparisons may not be directly aligned with the FY25 Modernization accounts. The full details of the FY26 budget request are expected to be released in late May, which will further clarify the potential impact on specific sectors and companies within the GovTech and Space industries.

In other recent news, Red Cat Holdings, Inc. announced a significant registered direct offering expected to generate approximately $30 million in gross proceeds. The company plans to use these funds for general corporate purposes, including working capital. Red Cat Holdings also amended its financial agreements with Lind Global Asset Management, introducing a cap on share issuance to comply with Nasdaq rules and extending the shareholder approval deadline for transactions to June 30, 2025. Additionally, the company adjusted the terms of its financial agreement with Lind, increasing the note balance to $18.15 million and modifying conversion prices. In another development, Red Cat Holdings appointed Shawn Webb as President of its subsidiary FlightWave Aerospace Systems Corporation, aiming to boost drone production capabilities. Webb’s extensive experience in aerospace operations is expected to support the development of Red Cat’s drone systems. The company has also scheduled its 2025 Annual Meeting of Stockholders for June 18, 2025, to be conducted telephonically. These developments reflect Red Cat Holdings’ ongoing efforts to manage its financial structure and expand its operational capabilities.

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