Investment strategist and Wall Street veteran Stephen Guilfoyle, known for accurately predicting Palantir’s market success in May 2024, has identified another promising defense sector investment: Kratos Defense.
Guilfoyle, whose expertise combines economic, fundamental, and technical analysis developed over decades since his time on the NYSE floor in the 1980s, is directing investor attention toward this military technology specialist.
Kratos Defense, which draws its name from the Greek personification of strength, has established itself as a key player in military and government technology solutions. The company’s portfolio includes unmanned aerial systems, cutting-edge defense technologies, and advanced satellite communications, with artificial intelligence integration enabling autonomous drone operations.
The company’s stock performance has been remarkable, posting a 96.6% gain in 2023, followed by a 30% increase in 2024. The momentum has continued into 2025, with shares already up 16% in the first two weeks of January.
A significant catalyst for Kratos’s recent surge was a major Pentagon contract announced on January 6. The five-year agreement, focused on expanding hypersonic flight testing capabilities, could reach $1.45 billion if all options are exercised. CEO Eric DeMarco emphasized the program’s importance to the company’s organic growth projections. Following this announcement, Kratos secured two additional contracts totaling $148 million.
Trading at $29.37 as of January 10, Guilfoyle suggests the stock could reach $35, provided it maintains support at the $28 level. This projection follows Guilfoyle’s previous success with Kratos in TheStreet Pro’s “Stocks Under $10” portfolio, which he co-managed with Chris Versace, achieving an exit price of approximately $17.
The company’s third-quarter financial results showed adjusted earnings of 11 cents per share, compared to 12 cents in the previous year, while revenue slightly increased to $275.9 million from $274.6 million. Looking ahead to the fourth quarter, analysts expect adjusted earnings of 10 cents per share on revenue of $287.6 million.
Kratos’s financial health appears robust, with $301.5 million in cash and $61.9 million in unearned revenue as of the September quarter. The company’s current assets of $838.4 million substantially exceed current liabilities of $260.5 million, resulting in favorable current and quick ratios of 3.22 and 2.61 respectively, well above the standard threshold of 1.
Raymond James maintains a strong buy rating on Kratos shares, projecting that the hypersonic test bed contract will likely become the San Diego-based company’s fastest-growing program in 2025 and 2026. However, Jefferies has taken a more conservative stance, reducing its price target to $29 from $30 with a hold rating, citing balanced Defense and IT services revenue outlook without significant positive catalysts.
This latest development in the defense sector comes as investors continue to seek alternatives to high-valuation technology stocks like Palantir, particularly in the defense and AI space. Kratos’s combination of established defense capabilities and emerging technologies positions it as a notable player in this evolving market landscape.