Cantor Fitzgerald initiates ‘Top Pick’ Kratos Defense with an Overweight

As previously reported, Cantor Fitzgerald initiated coverage of Kratos Defense (KTOS) with an Overweight rating and $60 price target The firm is also flagging Kratos as its Top Pick in the space due to its clear path of X-58 scaling and rapid growth of microwave electronics and munitions. While Cantor has seen significant run-ups in share price ahead of X-58’s expected entry into services, it thinks this time market sentiment is under-appreciating the upside and sustainability of Kratos’ growth algorithm, especially considering Group 4-5 drones as not a “winner take all” as implied by CCA, but part of a series of service-branch solutions where each drone fits each mission. In this setup, the firm especially likes the X-58 as U.S. force structure decisions move from survivable to attrition-derived outcomes.