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Investing.com - Stifel raised its price target on Kratos Defense & Security (NASDAQ:KTOS) to $54.00 from $52.00 while maintaining a Buy rating following the company’s recent $500 million equity raise.
The research firm noted excitement about the "optionality" the new incremental cash provides Kratos, which completed the equity raise last week. With a healthy current ratio of 2.84 and moderate debt levels, the company maintains strong financial flexibility. Stifel expects to gain more insights on how management plans to allocate these funds during the upcoming second-quarter earnings call, scheduled for July 31.
One highlighted investment area is Prometheus, Kratos’s solid rocket motor joint venture with Rafael Advanced Defense Systems. The 50/50 partnership was established earlier this year, before Rafael’s interceptor missiles were deployed during the Iran conflict last month.
Stifel believes the prospects for Kratos’s partnership with Rafael have been enhanced by the "impressive effectiveness" of the Iron Dome system demonstrated in recent military operations.
The research firm anticipates the Prometheus joint venture will become "a significant earnings contributor" for Kratos Defense & Security in the future.
In other recent news, Kratos Defense & Security Solutions announced a $500 million primary equity share offering, with plans to use the proceeds for national security programs, strategic acquisitions, and debt reduction. The offering is subject to market conditions and includes an option for underwriters to purchase an additional $75 million of shares. Goldman Sachs recently upgraded Kratos Defense to a Buy rating, citing significant revenue growth potential due to strategic investments in drone programs and missile systems. Truist Securities also raised its price target for Kratos to $52, highlighting new capital projects expected to generate over $150 million in revenue. Despite the lack of specific project details, Stifel maintained its Buy rating, noting Kratos’s opportunity for growth. The recent share offering, however, led to a decline in Kratos’s stock price, a common occurrence due to potential dilution concerns. Baird, RBC Capital Markets, Truist Securities, and Raymond (NSE:RYMD) James are managing the offering.
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