Kratos Defense & Security Solutions (NASDAQ:KTOS) Stock Price Down 5.7% Following Analyst Downgrade

Key Points

• Kratos shares fell 5.7% to about $41 after B. Riley cut its price target from $128 to $91, though it maintained a Buy rating. The analyst consensus remains Moderate Buy, with an average target of $86.40.
• The company reported strong operating momentum, including 30.5% year-over-year revenue growth to $458.8 million, a quarterly earnings beat, and a $33.6 million NASA-related contract supporting its space and national-security business.
• Despite growth and a strong balance sheet, Kratos carries a high valuation—about 242 times earnings—alongside modest profitability and recent insider selling, increasing investor sensitivity to execution and further price-target reductions.

Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS - Get Free Report) shares traded down 5.7% during trading on Friday after B. Riley Financial lowered their price target on the stock from $128.00 to $91.00. B. Riley Financial currently has a buy rating on the stock. Kratos Defense & Security Solutions traded as low as $40.28 and last traded at $41.09. 3,407,232 shares traded hands during trading, a decline of 22% from the average session volume of 4,354,867 shares. The stock had previously closed at $43.59.

Other equities research analysts also recently issued reports about the company. Barclays assumed coverage on Kratos Defense & Security Solutions in a report on Friday, October 9th. They issued an "overweight" rating and a $90.00 price objective for the company. Citigroup reiterated a "market outperform" rating on shares of Kratos Defense & Security Solutions in a research note on Monday, October 19th. Oppenheimer assumed coverage on shares of Kratos Defense & Security Solutions in a research report on Thursday, October 22nd. They set an "outperform" rating and a $50.00 price objective on the stock. Weiss Ratings lowered shares of Kratos Defense & Security Solutions from a "hold (c)" rating to a "sell (d+)" rating in a research note on Wednesday, August 5th. Finally, The Goldman Sachs Group decreased their target price on shares of Kratos Defense & Security Solutions from $88.00 to $77.00 and set a "buy" rating for the company in a research note on Monday, October 12th. Three analysts have rated the stock with a Strong Buy rating, twenty have issued a Buy rating, one has given a Hold rating and two have issued a Sell rating to the company. Based on data from MarketBeat.com, the company currently has a consensus rating of "Moderate Buy" and an average target price of $86.40.

Insiders Place Their Bets

In other news, insider Phillip Carrai sold 6,500 shares of the firm's stock in a transaction that occurred on Thursday, October 15th. The shares were sold at an average price of $39.86, for a total transaction of $259,090.00. Following the completion of the transaction, the insider directly owned 169,196 shares of the company's stock, valued at $6,744,152.56. This trade represents a 3.70% decrease in their position. The sale was disclosed in a document filed with the SEC, which is available at this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CFO Deanna Lund sold 7,000 shares of Kratos Defense & Security Solutions stock in a transaction that occurred on Monday, October 26th. The stock was sold at an average price of $40.00, for a total value of $280,000.00. Following the transaction, the chief financial officer owned 266,740 shares of the company's stock, valued at $10,669,600. This represents a 2.56% decrease in their ownership of the stock. The disclosure for this sale is available in the SEC filing. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Over the last ninety days, insiders sold 382,013 shares of company stock worth $23,806,932. 1.50% of the stock is owned by company insiders.

Key Kratos Defense & Security Solutions News

Here are the key news stories impacting Kratos Defense & Security Solutions this week:

• Positive Sentiment: Kratos received a $33.6 million NASA-related contract from Sierra Lobo to design and build the power-conversion system for the Space Reactor-1 Freedom spacecraft, strengthening its space and national-security portfolio ahead of its next earnings report. NASA contract announcement
• Positive Sentiment: Recent analysis points to robust organic growth, strong bookings and production ramp-ups in unmanned systems, propulsion and defense electronics. Kratos’ latest reported revenue rose 30.5% year over year to $458.8 million, while its 1.3x trailing book-to-bill ratio supports future revenue visibility. Seeking Alpha growth analysis
• Positive Sentiment: Analysts continue to highlight potential upside from rising global military spending. B. Riley retained a Buy rating, and the consensus remains “Moderate Buy.” Kratos also has a strong balance sheet, including very low leverage, although its profitability remains modest.
• Neutral Sentiment: Investors are comparing Kratos with larger contractor Lockheed Martin. KTOS offers faster growth exposure but trades at a substantially richer valuation and has less established earnings and cash-flow scale, making the stock more sensitive to execution and interest-rate concerns. Kratos versus Lockheed Martin analysis
• Negative Sentiment: B. Riley lowered its KTOS price target from $128 to $91, while Royal Bank of Canada issued a more pessimistic forecast and previously reduced its target to $55 from $80. Although Buy or Outperform ratings remain, the cuts signal increasing caution about valuation and near-term execution.
• Negative Sentiment: Kratos trades at an elevated earnings multiple despite a net margin of only 2.03% and ongoing investment needs, including negative free cash flow highlighted in recent analysis. This leaves the stock vulnerable to profit-taking after its prior rally.
• Negative Sentiment: CFO Deanna Lund sold 7,000 shares for approximately $280,000 under a pre-arranged Rule 10b5-1 plan. The scheduled nature limits the signal, but insider selling may still weigh modestly on sentiment.

Hedge Funds Weigh In On Kratos Defense & Security Solutions

A number of institutional investors have recently made changes to their positions in the stock. Provenance Wealth Advisors LLC raised its stake in shares of Kratos Defense & Security Solutions by 128.9% during the third quarter. Provenance Wealth Advisors LLC now owns 744 shares of the aerospace company's stock valued at $32,000 after purchasing an additional 419 shares during the period. Gerber Kawasaki Wealth & Investment Management lifted its position in shares of Kratos Defense & Security Solutions by 2.7% during the third quarter. Gerber Kawasaki Wealth & Investment Management now owns 69,093 shares of the aerospace company's stock worth $2,950,000 after purchasing an additional 1,847 shares in the last quarter. Harold Davidson & Associates Inc. purchased a new position in shares of Kratos Defense & Security Solutions in the third quarter valued at $369,000. Traynor Capital Management Inc. boosted its stake in shares of Kratos Defense & Security Solutions by 48.9% in the third quarter. Traynor Capital Management Inc. now owns 8,954 shares of the aerospace company's stock valued at $382,000 after purchasing an additional 2,939 shares during the period. Finally, Sumitomo Mitsui Trust Group Inc. grew its holdings in Kratos Defense & Security Solutions by 16.7% during the 3rd quarter. Sumitomo Mitsui Trust Group Inc. now owns 1,664,120 shares of the aerospace company's stock valued at $71,041,000 after purchasing an additional 238,611 shares in the last quarter. 75.92% of the stock is owned by institutional investors and hedge funds.

Kratos Defense & Security Solutions Price Performance

The company has a current ratio of 5.54, a quick ratio of 4.99 and a debt-to-equity ratio of 0.04. The stock has a market cap of $7.71 billion, a PE ratio of 241.71 and a beta of 1.11. The company's 50 day moving average is $45.46 and its 200-day moving average is $65.15.

Kratos Defense & Security Solutions (NASDAQ:KTOS - Get Free Report) last announced its earnings results on Tuesday, August 4th. The aerospace company reported $0.21 earnings per share for the quarter, beating the consensus estimate of $0.14 by $0.07. Kratos Defense & Security Solutions had a return on equity of 3.07% and a net margin of 2.03%. The company had revenue of $458.80 million during the quarter, compared to the consensus estimate of $410.36 million. During the same period last year, the firm earned $0.11 earnings per share. The company's revenue was up 30.5% on a year-over-year basis. As a group, sell-side analysts predict that Kratos Defense & Security Solutions, Inc. will post 0.59 earnings per share for the current year.

About Kratos Defense & Security Solutions

Kratos Defense & Security Solutions, Inc is a technology and defense contractor that develops systems and products for national security applications. The company supports the U.S. Department of Defense, intelligence agencies, national security-related organizations and selected commercial customers, with an emphasis on affordable, rapidly deployable technologies.

Its offerings include unmanned aerial and target systems, hypersonic and high-speed systems, rocket and propulsion technologies, satellite communications equipment, microwave electronics, radar and missile-defense systems, electronic warfare solutions, command-and-control systems, and virtual and live training products.

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