As I was going over Goldman’s M&A list for 2025 a name stood out that saw recent size unusual call buyer flows

Kratos (KTOS) currently has $3M worth of calls bought in February $25, $27.5, $30 and May $35 calls.

KTOS also has a great consolidation set-up under the $27.65 level and looks likely to at least make a run to those $34 highs from 2021 and in a M&A scenario would expects a $35-$40 price.

KTOS has a large total addressable market spanning unmanned systems, space and satellites, turbine technologies, microwave electronics, and more, as well as strong product bases in rapidly growing new defense markets. Kratos remains well positioned in the fast-growing tactical drone space.

KTOS has a highly diverse base of customers and contracts with no contract representing more than 6% of 2023 revenue. Its fixed-price contracts, the majority of which are production contracts, represent approximately 70% of revenues. Revenues from U.S. Government agency customers in aggregate accounted for approximately 69% of revenues. Kratos’ relationships with the prime system integrators, including our being able to rapidly provide relevant, low-cost, differentiated and value-enhancing products, hardware and systems, is a key element of Kratos’ strategy and its core to our company’s success.

Management expects 2025 to be an inflection point year for Kratos’ satellite business, both in organic revenue growth and in profit generation. Kratos has no plans for any acquisitions of any size. KTOS is the absolute low-cost rapid provider of jet drones and is uniquely positioned. KTOS microwave business is doing very well because the Israelis are defending themselves. KTOS would love to see a large Defense budget but also wins in a tight budget situation due to the affordability offering.

KTOS has a $4.1B market cap and trades 46X Earnings, 34.5X EBITDA and 3X Book with revenues seen rising 11.35% in 2025 with 25.5% EPS growth. Rich valuation could make a deal less likely but KTOS is positioned in the right markets and a lot of these large defense plays have a ton of cash and need to reignite their portfolios, so KTOS would be an ideal target.