Kratos Defense Shares: Is the Rally Losing Momentum?

After an impressive surge, Kratos Defense shares are showing initial signs of a pullback. The defense contractor's stock is experiencing profit-taking pressure despite reporting outstanding quarterly earnings and pursuing strategic acquisitions. Investors are now questioning whether the aerospace and defense stock is entering a consolidation phase or if its upward trajectory will resume.

Kratos Defense is advancing an aggressive growth strategy alongside its robust financial performance. The company recently announced the acquisition of Orbit Technologies Ltd. for $356.3 million, a move expected to immediately enhance its satellite communications division. Additionally, Kratos has inaugurated a new manufacturing facility in Michigan with an annual production capacity exceeding 50,000 turbojet engines for military applications, signaling significant operational expansion.

Exceptional Quarterly Performance

The company's third-quarter 2025 results demonstrated remarkable strength, with revenue climbing 26% to $347.6 million, substantially surpassing analyst projections. Adjusted earnings per share reached $0.14, also exceeding market expectations. These figures underscore sustained demand for Kratos' unmanned systems and military communication solutions across defense sectors.

Should investors sell immediately? Or is it worth buying Kratos Defense?

Market Sentiment Remains Positive

Despite recent volatility that saw shares decline nearly 10% within a single week, analyst outlook remains predominantly bullish. The average price target stands at $82.36, with several firms projecting values as high as $125. Institutional investors maintain substantial positions, holding 76% of outstanding shares, indicating continued long-term confidence in the company's prospects.

However, the current trading price sitting more than 30% below the 52-week high suggests persistent selling pressure. Following a remarkable 169% annual gain, market participants are evaluating whether Kratos Defense requires a period of stabilization or if the upward momentum will continue unabated.