What Happened?
Shares of aerospace and defense company Kratos (NASDAQ: KTOS) jumped 2.3% in the morning session after an analyst at Canaccord Genuity reaffirmed a "Buy" rating on the stock and significantly raised the price target, which was coupled with news of a new contract from the U.S. Navy. The analyst, Austin Moeller, increased the price target to $120 from $74, a substantial 62.16% jump. Adding to the positive sentiment, Kratos was awarded a Phase 1 contract by the U.S. Navy to help establish a program for sustaining the AN/SPY-1 radar systems, which are key sensors on Aegis-equipped ships. The move highlighted the Navy's focus on maintaining the operational readiness of its fleet.
After the initial pop the shares cooled down to $107.66, up 1.9% from previous close.
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What Is The Market Telling Us
Kratos’s shares are extremely volatile and have had 32 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 2.2% on the news that the company announced it had been awarded a contract by the U.S. Navy to develop a sustainment capability for its AN/SPY-1 radar systems.
The stock's rise continued the positive momentum from the previous session following the news. The single-award agreement has a projected ceiling of $175 million across multiple phases and involves developing long-term support for the critical radar systems. These systems are used on the Navy's Aegis-equipped cruisers and destroyers and are expected to remain in service for decades. As part of the plan, Kratos will build a new 155,000-square-foot facility in Indiana to handle maintenance, modernization, and prototyping, with operations set to begin in 2027. This contract was seen as a significant win, securing a potential long-term revenue stream for the company.
Kratos is up 308% since the beginning of the year, and at $107.66 per share, has set a new 52-week high. Investors who bought $1,000 worth of Kratos’s shares 5 years ago would now be looking at an investment worth $5,154.
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