Applied Aerospace & Defense (AADX) stock offers a balanced risk-reward and a way to navigate the broader defense upcycle, but uncertainty linked with the recently combined company tempers the outlook, Morgan Stanley said in a Monday research note.

Applied Aerospace offers diversified exposure across end-markets, and its material science expertise and IP-protected production processes make it a supplier of choice for defense companies, but limited operating history as a combined entity warrants a discount to peers, analysts wrote.

The company is well-positioned to benefit from rising global defense spending, according to the note.

The brokerage said it initiated coverage of the stock with an equal-weight rating and a price target of $23 per share.

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