Shares of Kratos Defense & Security Solutions Inc. (NASDAQ:KTOS) are trading higher Monday following an upwardly revised price target and more bullish outlook from Benchmark.
What To Know: The firm raised its 12-month price target for Kratos Defense to $48 from $40, citing new federal defense funding and rising global tensions that underscore Kratos' relevance in future conflicts.
Benchmark analyst Josh Sullivan highlighted two major developments driving the increased valuation forecast. First, the Senate Armed Services Reconciliation Bill, which includes $270 million in new funding for Marine Corps unmanned combat aircraft programs. Kratos is a key contractor in this space, having worked with the Marines on the Valkyrie drone since 2022 and having recently secured a $35 million expansion contract in January. This funding increase could translate into orders for 30 to 50 new Valkyrie units.
Second, Kratos was awarded a five-year OTA contract for the Multi-Service Advanced Capability Hypersonic Test Bed (MACH-TB) 2.0 under Task Area 1 in January. The bill also mentions a $400 million expansion to the program, which would put Kratos “well ahead” of expected timelines.
The funding is seen as a fast-track boost to an already sizable award and positions Kratos at the center of U.S. hypersonic weapons testing efforts. This expansion is especially timely as Iran's recent military posturing has highlighted the need for advanced drones, hypersonic systems, and ISR (intelligence, surveillance and reconnaissance) capabilities, all core areas of the Kratos portfolio.
Benchmark now projects 2025 revenue of $1.3 billion and adjusted EBITDA of $118.1 million, with an increase to $160.6 million in 2026. That would represent a 36% year-over-year jump in EBITDA.
Benchmark’s price target of $48 acknowledges a potentially high valuation compared to peers, but the firm believes it’s justified by Kratos’ exposure to next-gen defense tech paired with strong government alignment.
KTOS Price Action: Kratos Defense shares were well off the highs of the session, but still up 1.79% at $43.88 at the time of publication Monday, according to Benzinga Pro.
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