Drones, Hypersonics, and Airbus: Kratos Becomes the Defense Market’s Dark Horse

Kratos Defense & Security Solutions. (NASDAQ:KTOS) is one of the best space stocks to buy according to hedge funds. On July 8, 2025, Cantor Fitzgerald initiated coverage of the stock with a Buy rating and a bold $60 price target, citing Kratos’ leadership in unmanned aerial systems and its central role in hypersonic test infrastructure.

The report specifically highlighted the company’s expanding portfolio of affordable combat drones, such as the XQ-58A Valkyrie, and its pivotal contracts under the MACH-TB hypersonic testbed program. This comes just days after multiple other firms, including Benchmark, Stifel, and RBC, reaffirmed or upgraded their bullish stances, with price targets ranging between $50 and $54.

Drones, Hypersonics, and Airbus: Kratos Becomes the Defense Market’s Dark Horse

Analysts appear to be coalescing around Kratos’ reputation as a rare defense-tech play: agile, innovation-driven, and deeply embedded in programs that are both high priority and high margin. That confidence got another jolt on July 16, when Airbus announced a partnership with Kratos to supply Valkyrie drones, equipped with Airbus mission systems, to the German Air Force. Deliveries are expected by 2029, but the contract solidifies Kratos’ growing international relevance in the unmanned combat space.

Founded in 1994 and headquartered in San Diego, Kratos specializes in disruptive defense technologies, including autonomous aircraft, hypersonic test vehicles, missile defense systems, and satellite ground infrastructure. Its customers include the U.S. Department of Defense, NATO allies, and major primes looking for cutting-edge solutions without the legacy bloat.

While we acknowledge the potential of KTOS to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than KTOS and that has 100x upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.