Kratos is a technology, products, system and software company addressing the defence, national security, and commercial markets. However, Kratos has built its whole pitch around being more than a “test services” company, yet most of its revenues are still test/demonstrator programs.
Why the priced in expansion is unlikely:
- Size & capital base: Kratos does ~$1.1B revenue with single-digit margins. To go from testbed shop to prime contractor, they’d need billions in infrastructure, engineering, and political capital, which they do not have.
- Customer choices already made: The USAF CCA Increment 1 decision was pivotal. They passed over XQ-58 Valkyrie. That was the clearest shot Kratos had at scaling into a production UAV program.
- Hypersonics (Mach-TB 2.0) are testbeds only; the operational hypersonic weapons are led by Lockheed, Raytheon, Northrop.
- Competition: Anduril, GA-ASI, Boeing, Northrop all have deeper pockets, lobbying, and trusted supply chains.
- DoD prefers scale & reliability: Kratos is a “nice to have” cheap option, not the strategic backbone.
- History of promises: Kratos has been saying “we’ll pivot into production” for years. Yet most revenue is still target drones and test contracts. Track record suggests a structural ceiling.
As such, the current $15 billion market cap implies many current test contracts will expand into real production at scale and provide incredible revenue growth, which seems very unlikely.
Our base-case DCF model (GAAP net income based): equity value ≈ $2bn ($11.67/share), compared to a current price of $88/share. The shares screen materially overvalued on fundamentals.
Technicals:
Entering a short at $88, being close to Fib level of $90, and RSI signalling overbought. Looking to start taking profits at $80, and $72.
Why the priced in expansion is unlikely:
- Size & capital base: Kratos does ~$1.1B revenue with single-digit margins. To go from testbed shop to prime contractor, they’d need billions in infrastructure, engineering, and political capital, which they do not have.
- Customer choices already made: The USAF CCA Increment 1 decision was pivotal. They passed over XQ-58 Valkyrie. That was the clearest shot Kratos had at scaling into a production UAV program.
- Hypersonics (Mach-TB 2.0) are testbeds only; the operational hypersonic weapons are led by Lockheed, Raytheon, Northrop.
- Competition: Anduril, GA-ASI, Boeing, Northrop all have deeper pockets, lobbying, and trusted supply chains.
- DoD prefers scale & reliability: Kratos is a “nice to have” cheap option, not the strategic backbone.
- History of promises: Kratos has been saying “we’ll pivot into production” for years. Yet most revenue is still target drones and test contracts. Track record suggests a structural ceiling.
As such, the current $15 billion market cap implies many current test contracts will expand into real production at scale and provide incredible revenue growth, which seems very unlikely.
Our base-case DCF model (GAAP net income based): equity value ≈ $2bn ($11.67/share), compared to a current price of $88/share. The shares screen materially overvalued on fundamentals.
Technicals:
Entering a short at $88, being close to Fib level of $90, and RSI signalling overbought. Looking to start taking profits at $80, and $72.
Zlecenie aktywne
Setting a stop loss at $93 in case momentum of potential business growth continues.
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Wyłączenie odpowiedzialności
Informacje i publikacje przygotowane przez TradingView lub jego użytkowników, prezentowane na tej stronie, nie stanowią rekomendacji ani porad handlowych, inwestycyjnych i finansowych i nie powinny być w ten sposób traktowane ani wykorzystywane. Więcej informacji na ten temat znajdziesz w naszym Regulaminie.