Kratos is a technology, products, system and software company addressing the defence, national security, and commercial markets. However, Kratos has built its whole pitch around being more than a “test services” company, yet most of its revenues are still test/demonstrator programs.
Why the priced in expansion is unlikely:
- Size & capital base: Kratos does ~$1.1B revenue with single-digit margins. To go from testbed shop to prime contractor, they’d need billions in infrastructure, engineering, and political capital, which they do not have.
- Customer choices already made: The USAF CCA Increment 1 decision was pivotal. They passed over XQ-58 Valkyrie. That was the clearest shot Kratos had at scaling into a production UAV program.
- Hypersonics (Mach-TB 2.0) are testbeds only; the operational hypersonic weapons are led by Lockheed, Raytheon, Northrop.
- Competition: Anduril, GA-ASI, Boeing, Northrop all have deeper pockets, lobbying, and trusted supply chains.
- DoD prefers scale & reliability: Kratos is a “nice to have” cheap option, not the strategic backbone.
- History of promises: Kratos has been saying “we’ll pivot into production” for years. Yet most revenue is still target drones and test contracts. Track record suggests a structural ceiling.
As such, the current $15 billion market cap implies many current test contracts will expand into real production at scale and provide incredible revenue growth, which seems very unlikely.
Our base-case DCF model (GAAP net income based): equity value ≈ $2bn ($11.67/share), compared to a current price of $88/share. The shares screen materially overvalued on fundamentals.
Technicals:
Entering a short at $88, being close to Fib level of $90, and RSI signalling overbought. Looking to start taking profits at $80, and $72.
Why the priced in expansion is unlikely:
- Size & capital base: Kratos does ~$1.1B revenue with single-digit margins. To go from testbed shop to prime contractor, they’d need billions in infrastructure, engineering, and political capital, which they do not have.
- Customer choices already made: The USAF CCA Increment 1 decision was pivotal. They passed over XQ-58 Valkyrie. That was the clearest shot Kratos had at scaling into a production UAV program.
- Hypersonics (Mach-TB 2.0) are testbeds only; the operational hypersonic weapons are led by Lockheed, Raytheon, Northrop.
- Competition: Anduril, GA-ASI, Boeing, Northrop all have deeper pockets, lobbying, and trusted supply chains.
- DoD prefers scale & reliability: Kratos is a “nice to have” cheap option, not the strategic backbone.
- History of promises: Kratos has been saying “we’ll pivot into production” for years. Yet most revenue is still target drones and test contracts. Track record suggests a structural ceiling.
As such, the current $15 billion market cap implies many current test contracts will expand into real production at scale and provide incredible revenue growth, which seems very unlikely.
Our base-case DCF model (GAAP net income based): equity value ≈ $2bn ($11.67/share), compared to a current price of $88/share. The shares screen materially overvalued on fundamentals.
Technicals:
Entering a short at $88, being close to Fib level of $90, and RSI signalling overbought. Looking to start taking profits at $80, and $72.
Trade aktif
Setting a stop loss at $93 in case momentum of potential business growth continues.Trading ditutup: stop tercapai
Stop loss hit, most likely going to re-enter the short at $98-100, unless positive defence industry news continues.Catatan
Had a small speculative short open since $95, closed at $71 for a 25% profit.
Pernyataan Penyangkalan
Informasi dan publikasi ini tidak dimaksudkan, dan bukan merupakan, saran atau rekomendasi keuangan, investasi, trading, atau jenis lainnya yang diberikan atau didukung oleh TradingView. Baca selengkapnya di Ketentuan Penggunaan.
Pernyataan Penyangkalan
Informasi dan publikasi ini tidak dimaksudkan, dan bukan merupakan, saran atau rekomendasi keuangan, investasi, trading, atau jenis lainnya yang diberikan atau didukung oleh TradingView. Baca selengkapnya di Ketentuan Penggunaan.