Why Kratos Stock Dropped Again Today
Key Points
Kratos beat earnings last week, but five analysts cut their price targets on the stock anyway.
A sixth price target cut just dropped this morning.
- 10 stocks we like better than Kratos Defense & Security Solutions ›
"At a valuation north of 360 times earnings, and with cash still burning, I see no compelling reason to own Kratos stock today."
That basically summed up my thinking last week on Kratos Defense & Security (NASDAQ: KTOS), after reporting a pro forma earnings beat -- but GAAP earnings less than half its pro forma income.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
This morning, investment banker Jefferies disagreed with my take, reiterating a "buy" rating on Kratos. But even Jefferies is starting to have second thoughts about this defense stock, and it is lowering its price target by $5 to $80 a share.
Kratos stock is down 3.2% as of 9:50 a.m. ET.
Image source: Getty Images.
Kratos Q1 earnings
Kratos grew sales 23% year over year in Q1 and doubled its reported GAAP income, but free cash flow was negative $47.3 million, as Kratos continues to burn cash. Despite this quibble, Jefferies called the company's Q1 report "solid" in a report covered on TheFly.com on Sunday.
As drones gain greater prominence in conflicts in both Ukraine and Iran, Kratos's order book is booming. With orders coming in the door faster than Kratos can fulfill them, the company's book-to-bill ratio grew to 1.6 in Q1, foreshadowing further sales growth ahead.
What's next for Kratos
So, will Kratos stock go up or will Kratos stock go down? No one really knows, but it's perhaps instructive that out of the six analysts who changed their price targets on Kratos Thursday, the day after earnings, only one raised its price target, and five lowered their price targets.
Now Jefferies makes that six-to-one.
Even though the stock looks a bit cheaper today (at 340 times earnings), I still think it's too expensive to buy.
Should you buy stock in Kratos Defense & Security Solutions right now?
Before you buy stock in Kratos Defense & Security Solutions, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Kratos Defense & Security Solutions wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $471,827!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,319,291!*
Now, it’s worth noting Stock Advisor’s total average return is 986% — a market-crushing outperformance compared to 207% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of May 11, 2026.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group and Kratos Defense & Security Solutions. The Motley Fool has a disclosure policy.
Recommended Articles
