Why Kratos Defense Stock Is Slumping Today Despite Big Contract Win
Key Points
The U.S. Space Force awarded Kratos a big contact to manage ground operations for a missile warning system.
The contract value could approach $450 million contingent on options.
The stock's rich valuation has some investors selling on the news.
- 10 stocks we like better than Kratos Defense & Security Solutions ›
Kratos Defense & Security (NASDAQ: KTOS) stock plunged today, even after the company announced yesterday that it had received a major contract from the U.S. military. At 2:35 p.m. ET, Kratos stock was near the low of the day, down by 7.8%.
Yesterday, the company announced a massive contract to support the U.S. Space Force, worth up to $446.8 million. That's great news for a company that reported a total of $1.35 billion in full-year 2025 revenue. So what gives?
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 »
Image source: The Motley Fool.
Sell the news mentality
When a company reports good news and investors sell the stock, there must be more going on. Kratos was awarded a valuable contract to lead a team integrating existing and next-generation ground assets supporting the Resilient Missile Warning and Tracking (MWT) program for the U.S. Space Force.
That's undoubtedly good for the company and will boost its already rapid business expansion. But investors have already built a lot of good news into Kratos' valuation. Even after the stock has dropped more than 20% over the last month, shares still trade at a premium valuation.
A price-to-sales (P/S) ratio of about 8 means investors expect more large contracts to be announced. In the meantime, some opted to sell on the news and perhaps allocate those funds elsewhere.
A strong underlying business means this name could be a great stock to own. That time just isn't quite yet, as the stock continues to consolidate to a more reasonable valuation.
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 $536,003!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,116,248!*
Now, it’s worth noting Stock Advisor’s total average return is 946% — a market-crushing outperformance compared to 190% 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 April 9, 2026.
Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kratos Defense & Security Solutions. The Motley Fool has a disclosure policy.
Recommended Articles
