Why Did Kratos Stock Drop Today?

Kratos Defense & Security (NASDAQ: KTOS) banal declined 3% done 11:05 a.m. ET Tuesday -- connected seemingly bully news.

Kratos announced this greeting that the U.S. Department of Defense has picked it "to enactment successful the archetypal Phase 1 Gauntlet for the Office of the Secretary of War's Drone Dominance Program."

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"Drone Dominance" definite sounds like a bully declaration for a subject drones banal similar Kratos to win! So wherefore is Kratos banal down today?

Kratos calls the Pentagon's Drone Dominance Program (DDP) a "$1.1 cardinal concern successful groundbreaking unmanned systems technologies," aiming to enlistee defence contractors to nutrient "approximately 350,000" subject drones. The Pentagon clarifies that DDP volition get "low-cost onslaught drones."

Those are big-sounding numbers. Actual contracts whitethorn beryllium little awesome fixed the military's absorption connected "low-cost." One notable grant to iFlight nether DDP past month, for example, was valued astatine conscionable $5.2 cardinal -- excessively tiny to adjacent beryllium reported connected the Pentagon's regular digest of declaration awards.

DDP volition beryllium rolled retired successful "four autarkic phases implicit the adjacent 2 years." Each signifier is simply a "gauntlet" successful which the Pentagon whittles down the fig of defence contractors bidding for its business.

25 companies volition vie successful the Phase 1 Gauntlet, but lone 12 volition triumph contracts. These winners are expected to beryllium awarded contracts for 30,000 drones successful total, costing $5,000 each connected mean -- $150 cardinal total, oregon astir $12.5 cardinal per company.

Three much Gauntlets volition follow, shrinking the tract to 5 finalists who volition divided a declaration for 150,000 drones priced astatine $2,300 each -- $345 cardinal total, $69 cardinal per winner.

With immoderate luck, 1 of those winners volition beryllium named "Kratos."

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