Why Kratos Defense and Security Solutions Soared This Week
Key Points
Two firms have hiked their price targets on Kratos stock over the past week.
Kratos received an award for $175 million to upgrade the U.S. Navy radar systems.
Shares of Kratos are trading at a premium valuation right now.
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After climbing more than 11% last week, Kratos Defense and Security Solutions (NASDAQ: KTOS) stock has continued its ascent over the past few days. And a large part of it has to do with analysts' bullish opinions on Kratos stock.
According to data provided by S&P Global Market Intelligence, Kratos stock had risen as much as 17% from last Friday's close to 9:40 a.m. ET today.
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Wall Street projects this drone stock will continue ascending higher and higher
Last Thursday, Citizens JMP analyst Trevor Walsh hiked the price target on Kratos stock to $105 from $70 and kept an outperform rating. According to thefly.com, Walsh predicated his more bullish price target on the belief that the company has room to grow in numerous areas: unmanned systems, space and satellites, as well as others in which the company specializes. This auspicious view on Kratos stock was a tailwind that persisted into this week, spurring a steady rise in Kratos stock.
The bullish outlook on Kratos stock extended into today when Canaccord lifted its price target to $120 from $74. The firm based its decision on the company receving an award of $175 million to upgrade the U.S. Navy's radar systems in support of ballistic missile defense and integrated air and missile warfare.
Should investors consider fortifying their portfolios with Kratos right now?
Analysts are increasingly optimistic that Kratos stock can soar higher, but investors must remember that analysts often have shorter investing horizons that the multiyear holding periods that The Motley Fool favors. Therefore, investors should take the higher price targets with a grain of salt.
With the outstanding performance of Kratos stock since the start of the year, shares are now trading at a lofty valuation. Currently, Kratos stock is priced at about 1,057 times trailing earnings. At this point, investors would be better advised to consider waiting for a pullback in Kratos stock before picking up shares. Fortunately, those eager to gain exposure to either drone stocks or defense stocks have plenty of other options.
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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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