Why Kratos Defense & Security Stock Is Soaring Today

Defense stocks just got their wings—and Kratos is leading the charge.

Rocketing Past Expectations

Kratos shares blasted through resistance levels as defense sector momentum builds. The pure-play defense contractor capitalized on renewed government spending signals and contract wins that have analysts scrambling to upgrade targets.

Contract Flow Turns to Flood

Pentagon budget allocations finally trickling down to specialty defense players. Kratos' drone technology and satellite systems positioning them for the modern warfare era—where cyber and space domains command premium valuations.

Wall Street Plays Catch-Up

Institutional money chasing defense exposure after quarters of ignoring the sector. Because nothing says 'strategic positioning' like chasing momentum six months late—typical finance herd mentality at its finest.

This isn't just a pop—it's a repositioning. Defense spending cycles have long tails, and Kratos built the rocket.

Image source: Getty Images.

Elroy who?

Elroy Air is hardly a household name, so it may not be immediately apparent why this is good news. Based out of San Francisco, Elroy Air is a 10-year-old start-up building "autonomous aerial cargo systems for middle-mile logistics and military resupply."

In other words, it builds remotely operated aircraft that deliver supplies to military units in the field.

To further this effort, Elroy picked Kratos to serve as its "exclusive U.S. manufacturing partner for the Chaparral," described as a hybrid-electric autonomous vertical takeoff and landing (VTOL) cargo drone that can carry 300-lb. payloads up to 300 miles.

Is Kratos stock a buy?

Kratos notes that manufacturing of the Chaparral will begin in 2026, and says Elroy plans to build the aircraft at high volume. This suggests that revenue from the contract could be substantial. However, Kratos did not provide any specific figures for estimated revenue from the contract -- nor even define precisely how many units "high volume" might entail.

What we do know is this: Kratos is a $13.6 billion company that earned less than $15 million last year. (That's right, its price-to-earnings ratio is verging on quadruple digits, getting awfully close to a P/E of 1,000.) Kratos is also burning cash (negative $61 million in annual free cash flow).

Although Kratos does have nearly $500 million in the bank, and can afford to burn some cash for a while, longer-term these are not great numbers. Unless profits grow spectacularly over the next few years, Kratos stock will be a sell for me.