Al Root
Drones are hot, and so is this drone stock.
Shares of drone technology company Kratos Defense & Security Solutions rose Monday after catching a new Buy rating.
Jefferies analyst Sheila Kahyaoglu upgraded Kratos stock to Buy from Hold. She left her price target unchanged at $85, up about 26% from recent levels.
Kratos stock rose 3.9% to $69.92 in premarket trading, while S&P 500 futures were up 0.1% and Dow Jones Industrial Average futures were up down 0.1%.
Kahyaoglu sees 28% sales growth in 2026, to $1.7 billion, and 20% growth in 2027, to $2.1 billion, boosted in part by Valkyrie Tactical Drone production increases. Valkyrie is Kratos' collaborative combat aircraft, designed to fly alongside crewed fighter jets, including the F-35.
The "bull case is bolstered by missile demand," added Kahyaoglu. In addition to drones, Kratos makes parts for solid rocket motors and hypersonic technologies.
Missiles, along with drones, have been in focus for militaries around the globe since fighting began in Ukraine and Iran. Low-cost autonomous battle systems, missiles, and interceptor missiles have dominated those conflicts, with combatants looking to add more autonomous systems and counter-drone systems to achieve technical superiority.
Kratos' drone business, of course, isn't a hidden gem. Investors are well aware of the growth potential. Coming into Monday trading, Kratos' stock was up 142% over the past 12 months. Gains left shares trading at about 87 times estimated 2026 earnings, according to FactSet.
Still, shares are down 11% this year, providing Jefferies with an entry point.
Overall, 81% of the analysts covering the company rate its shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 typically ranges from 55% to 65%. The average analyst price target for Kratos stock is about $119, up 40% from Kahyaoglu's target.
Write to Al Root at allen.root@dowjones.com
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April 06, 2026 08:23 ET (12:23 GMT)
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