Is this U.S.-China selloff a buy? A top Wall Street voice weighs in
Investing.com - Canaccord Genuity raised its price target on Kratos Defense & Security (NASDAQ:KTOS) to $120.00 from $74.00 on Thursday, while maintaining a Buy rating on the defense contractor’s stock.
The significant price target increase comes despite Kratos shares already rising approximately 64.8% over the past month, according to Canaccord Genuity’s analysis. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with multiple valuation metrics at elevated levels.
Canaccord cited recently announced progress across several company initiatives combined with increased fiscal support for hypersonic weapons (MACH-TB) and Navy/Air Force Collaborative Combat Aircraft (CCA) programs as key factors supporting the higher valuation.
The firm specifically noted September’s Navy announcement that Northrop was selected to design and build a prototype autonomous CCA, which presents an opportunity for Kratos since the two companies jointly developed an operational Valkyrie CCA variant for the U.S. Marine Corps under the MUX TACAIR program.
Canaccord also highlighted that Overseas Contingency Operations, Base Budget, and Supplemental (OBBB) funding for CCA included $270 million for the Marines’ wingman and $678 million for the U.S. Air Force, with an additional $400 million in incremental funding added to OBBB for the $1.45 billion MACH-TB program next year.
In other recent news, Kratos Defense & Security Solutions has been awarded a $175 million contract by the U.S. Navy for the sustainment of AN/SPY-1 radar systems. This contract is part of "Project Anaconda" and supports radar systems on Aegis-equipped cruisers and destroyers. Additionally, Kratos has completed the Preliminary Design Review for the Space Development Agency’s Advanced Fire Control Ground Integration system, which advances the program on an accelerated timeline. In a strategic move, Kratos has partnered with Elroy Air to manufacture the Chaparral autonomous cargo drone, aiming to enhance production capacity over the next five years. On the financial front, B.Riley downgraded Kratos’s stock rating from Buy to Neutral, citing concerns over a stretched valuation. Despite this, Citizens JMP raised its price target for Kratos to $105, maintaining a Market Outperform rating. These developments reflect Kratos’s ongoing activities and financial evaluations in the defense sector.
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