Key Takeaways
- Kratos stock is down 46% in 2026, even though the company raised its revenue forecast twice, most recently to $1.75-1.81 billion.
- At its January peak the stock traded at more than 15x sales, and a stock sale of roughly $1 billion in February diluted shareholders.
- KeyBanc cut its price target to $75 from $130 on Nov. 2 and kept its Overweight rating, and the consensus target has fallen to $90.
- Kratos looks like a buy for patient investors if third-quarter results on Nov. 5 show the rising margins management promised.
Kratos Defense & Security Solutions (KTOS) is down 46% in 2026, and analysts have spent three weeks cutting their targets ahead of the company’s third-quarter report on Thursday, Nov. 5.
The latest came from KeyBanc on Nov. 2: a $75 target, down from $130, with its Overweight rating intact. That’s still 83% above the stock’s price.
The business has held up its end
First-quarter revenue rose 22.6% to $371.0 million, or 15.8% organically, and Kratos raised its 2026 forecast on May 6. Second-quarter revenue rose 30.5% to $458.8 million, or 19.1% organically, and on Aug. 4 the forecast went up again, to $1.75-1.81 billion.
Backlog reached $2.08 billion at the end of June, and the bid and proposal pipeline $15.0 billion. When Kratos raised its forecast in May, CEO Eric DeMarco said, “There is a generational recapitalization of the U.S. defense industrial base underway.”
Analysts expect the growth to keep coming, with revenue of $2.23 billion in 2027 and $2.72 billion in 2028:
KeyBanc says its own estimates are largely unchanged.
TIKR tracks 25 analysts on Kratos Defense & Security Solutions. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Kratos Defense & Security Solutions, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Kratos Defense & Security Solutions’ Analyst Ratings
Investors paid up in January
The trouble was the price. At its mid-January peak, Kratos traded at more than 15x sales, a multiple defense hardware makers almost never get. Then, after the close on Feb. 26, it filed to sell stock, raising roughly $1 billion for new drone and hypersonic facilities and diluting existing holders. By September, the stock was down to about 6x sales.
Its forward P/E has come down from 183x in mid-January to 43x at the latest close, below its five-year average of 58x:
That’s twice the 22x low it hit in October 2022, so investors are still paying up for growth.
Analysts cut their targets and stuck with the stock
KeyBanc wasn’t alone. Goldman Sachs cut its target to $77 from $88 on Oct. 12, and Citizens, Noble Capital, Piper Sandler, RBC Capital and B. Riley followed over the next three weeks, none of them downgrading the stock. Macquarie and Oppenheimer initiated coverage with Outperform ratings and targets of $70 and $50.
The consensus target has dropped from $119 in March to $90, its lowest point in the past year:
$90 is more than double the latest close. But KeyBanc’s $75 is about 79x the earnings analysts expect over the next 12 months, well above the stock’s 58x average. For the stock to get there within a year, earnings have to keep growing much faster than revenue, as they did in the second quarter, when adjusted EPS rose to $0.21 from $0.11 a year earlier.
What I want to see on Thursday
Management has guided third-quarter organic growth of 19-25%, and DeMarco said in August that EBITDA margins should keep rising in the second half and into 2027 as production scales.
They slipped in the second quarter: adjusted EBITDA was 8% of revenue, down from 10% in the first quarter. And Kratos used $18.9 million of free cash flow, after $43.1 million in the first quarter.
I’ll also watch for Valkyrie orders. Unmanned Systems grew 8.1% organically in the second quarter, down from 30.9% in the first, though Kratos expects about 10% for the year on recent awards. Airbus flew its U740-Valkyrie in Europe for the first time on Oct. 12.
At the end of the day, Kratos looks like a buy for investors willing to hold for years: the business is growing close to 20% organically, and the stock trades below its usual multiple. I just wouldn’t count on $75 in the next 12 months. If Thursday’s margins come in thin again, investors won’t keep paying 43x for long.
So what is Kratos stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
