Defense Modernization Will Drive Demand For Unmanned Systems

Analysts raised Kratos’ price target to $71.21, citing robust revenue prospects in unmanned and hypersonic systems, a record pipeline, favorable U.S. defense budget trends, recent capital raises, key regulatory shifts, and standout contract wins—all supporting a premium valuation.

Analyst Commentary

• Bullish analysts cite Kratos' strong revenue growth outlook, with opportunities in unmanned systems, turbine engines, hypersonics, and a record $13B+ pipeline supporting potential 20–30% annual growth through 2030 and substantial margin expansion.
• Several note the significance of recent and pending U.S. defense budget priorities, with increased funding for critical modernization areas (air defense, drones, engines, space), bipartisan support, and specific allocations expected for Kratos programs.
• The company’s substantial capital raises (approx. $500M) are seen as providing increased strategic optionality, enabling investment in new capex projects, supporting scalable “winner-not-take-all” drone solutions, and underpinning both near- and long-term growth trajectories.
• Regulatory and policy shifts—such as the removal of restrictive drone innovation policies and greater DOD engagement—are viewed as catalysts for accelerating program wins and revenue expansion, especially as the defense industrial base is rebuilt.
• Recent earnings outperformance and continued success in capturing contracts in major emerging markets validate Kratos’ business model, positioning it at a critical inflection point within the evolving defense supply chain and supporting a premium market valuation.

What's in the News

• The Trump administration is moving to ease restrictions on international sales of advanced U.S. military drones, a shift that could benefit Kratos and expand its addressable market alongside peers such as General Atomics and Anduril (Reuters).
• Saudi Arabia may receive approval for over 100 MQ-9 "Reaper" drones under an expanded $142B arms deal, signaling substantial potential order flow for drone manufacturers (Reuters).
• Raymond James has doubled its price target on Kratos Defense to $80 (from $40), maintaining a Strong Buy rating based on strong Q2 results, a record $13B pipeline, and projected $3B+ revenue within a few years (Raymond James research note).
• Kratos is positioned in critical modernization areas—air defense, hypersonics, drones, engines, and space—that are expected to maintain relevance across future U.S. administrations (Raymond James research note).
• The latest U.S. defense budget prioritizes spending on high-tech missiles, drones, and troop pay, supporting industry demand for key players like Kratos, which is listed among leading public drone companies (Reuters).

Valuation Changes

Summary of Valuation Changes for Kratos Defense & Security Solutions

• The Consensus Analyst Price Target remained effectively unchanged, moving only marginally from $70.47 to $71.21.
• The Future P/E for Kratos Defense & Security Solutions remained effectively unchanged, moving only marginally from 178.12x to 180.08x.
• The Discount Rate for Kratos Defense & Security Solutions remained effectively unchanged, moving only marginally from 7.62% to 7.64%.