Why Kratos Defense & Security Solutions Stock Popped Friday
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Kratos makes innovative drones for the military -- but does its stock cost too much?Military drones manufacturer Kratos Defense & Security Solutions (KTOS +5.51%) stock gained 4.5% through 1:30 p.m. ET Friday. You can thank KeyBanc analyst Michael Leshock for that. This morning, Leshock initiated coverage on Kratos with an overweight rating and a $90 price target. Image source: Getty Images. Why KeyBank loves Kratos stock In today's note, Leshock cites Kratos's "high-growth exposure" to military initiatives, including Golden Dome, hypersonic missiles and aircraft, and "collaborative combat aircraft," also known as CCA or "loyal wingmen" -- drones that fly alongside and are controlled by piloted fighter jets -- as primary reasons to own Kratos stock. Kratos has a history as a provider of "proven rapid, low-cost development" drone products, primarily in the field of unmanned aircraft and missiles used for target practice, explains the analyst, and is well-positioned to benefit from increased defense spending both at home and abroad. In CCA, in particular, the company's XQ-58A Valkyrie loyal wingman drone is often compared to similar offerings from privately owned military contractors, General Atomics and Anduril Industries, as strong contenders for future production contracts. ExpandNASDAQ: KTOSKratos Defense & Security SolutionsToday's Change(5.51%) $3.94Current Price$75.33Key Data PointsMarket Cap$12BDay's Range$72.05 - $75.7852wk Range$23.90 - $112.57Volume56KAvg Vol3.9MGross Margin22.16% Is Kratos stock a buy? From a valuation perspective, Leshock argues Kratos stock is a buy based on an "8.5x blended 2026E/2027E P/S vs. 1–5x historical range" -- which sounds a little strange to me. If Kratos "historically" sells for between one and five times sales (and I agree that a price-to-sales ratio of one, at least, is an appropriate valuation for defense stocks), then it stands to reason 8.5 times sales is too much to pay -- and thus a very aggressive price target for Kratos stock.Advertisement Consider too that Kratos currently costs closer to nine times trailing sales, and the argument that this stock is a "buy" just doesn't hold water for me. Kratos stock, I fear, is a sell.Read NextNov 5, 2025 •By Joe TenebrusoWhy Kratos Stock Dropped TodayOct 9, 2025 •By Scott LevineWhy Kratos Defense and Security Solutions Soared This WeekSep 25, 2025 •By Eric VolkmanWhy Kratos Defense and Security Stock Topped the Market TodaySep 23, 2025 •By Rich SmithWhy Kratos Defense & Security Stock Popped TodaySep 16, 2025 •By Lou WhitemanWhy Kratos Defense & Security Stock Is Up TodayAug 14, 2025 •By Eric VolkmanWhy Kratos Stock Bumped Higher TodayAbout the AuthorRich Smith is a contributing Motley Fool defense and stock market analyst covering publicly traded and emerging companies in defense, space, aerospace, and other sectors. Prior to The Motley Fool, Rich practiced international corporate law for Clifford Chance in Russia, and for the Russian-Ukrainian Legal Group in Moscow, Kyiv, and Washington, D.C. He holds a bachelor’s degree in international relations from the College of William & Mary, a law degree from the University of Baltimore, and a language certification from the International Institute of Russian Language & Culture in Tver, Russian Federation. The Globe and Mail once featured him as “one of the best stock pickers since 2009.”TMFDittyX@RichSmithFoolStocks MentionedKratos Defense & Security SolutionsNASDAQ: KTOS$75.33 (+0.06%) $+3.94*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.Advertisement