TLDR
- Jefferies upgraded Kratos (KTOS) to Buy from Hold, keeping its price target at $85 — about 26% above recent levels.
- Analyst projects 28% sales growth in 2026 to $1.7B and 20% growth in 2027 to $2.1B, driven by drone and missile demand.
- The Valkyrie drone is moving into larger production with the U.S. Marine Corps, U.S. Air Force, and international customers.
- Kratos has a $14B opportunity pipeline including Prometheus and Hypersonics programs, with potential 30%+ CAGR through 2028.
- 81% of analysts covering KTOS rate it Buy, with an average price target of ~$119.
Jefferies upgraded Kratos Defense & Security Solutions (KTOS) to Buy from Hold on Monday, citing a $14 billion opportunity pipeline and strong production momentum across its drone and missile programs.
Kratos Defense & Security Solutions, Inc., KTOS
Analyst Sheila Kahyaoglu left her price target unchanged at $85, representing roughly 26% upside from recent levels. She projects 28% sales growth in 2026, pushing revenue to $1.7 billion, followed by 20% growth in 2027 to $2.1 billion.
The upgrade comes as Kratos stock sits 11% lower year-to-date, giving Jefferies what it sees as an attractive entry point into a name that is otherwise up 142% over the past 12 months.
Valkyrie, Kratos’ collaborative combat aircraft designed to fly alongside crewed jets like the F-35, is a key driver. The unmanned system is moving into larger production runs with the U.S. Marine Corps, U.S. Air Force, and international customers, which Jefferies expects to push margins higher.
Kahyaoglu also pointed to missile demand as a key upside driver. Kratos makes parts for solid rocket motors and hypersonic technologies — areas that have seen rising military interest globally since the start of the Ukraine conflict.
Strong Pipeline Fuels Upside Case
Jefferies identified a $14 billion opportunity pipeline within Kratos‘ KGS division, including the Prometheus and Hypersonics programs. The firm believes these programs could drive more than 30% compound annual growth through 2028.
In an upside scenario, Jefferies projects 2028 revenue of $3.7 billion — 57% above its base case — and EBITDA of $500 million, nearly double its base estimate. The $85 price target is based on 53 times the firm’s base 2028 EBITDA, with potential to reach $105 under a more bullish scenario.
Revenue has already grown 18.5% over the last twelve months, and analysts broadly expect 23% growth in 2026.
Kratos recently secured a contract with the Naval Surface Warfare Center for Oriole solid rocket motors and Thrust Vector Control nozzle kits, potentially worth up to $49.2 million.
Analyst Consensus Remains Bullish
The broader analyst community agrees with the bullish take. Some 81% of analysts covering KTOS rate it a Buy — well above the 55%-65% Buy-rating average for S&P 500 names. The average price target sits at around $119, significantly above Jefferies’ $85.
Kratos is also advancing an uncrewed combat aircraft system for the German Air Force with Airbus, with a maiden flight expected later this year.
At current prices, KTOS trades at around 87 times estimated 2026 earnings — a premium multiple that reflects investor expectations for continued growth in autonomous military systems.
Rocket Lab recently won a $190 million contract for 20 hypersonic test flights, a project led by Kratos under the Department of Defense’s MACH-TB 2.0 program.
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