Echelon Details Seeing growth and profitability at “an attractive price” and touting its “leading-edge” technology and validation from important industry peers, Echelon Capital analyst Mike Stevens initiated coverage of Kraken Robotics Inc. with a “buy” recommendation.
“Despite playing in a global sandbox with multibillion-dollar giants, Kraken’s leading-edge SAS technology helps it punch well above its weight in setting the industry standard,” he said. “Owning a customer and partnership list that boasts several NATO navies (e.g., Denmark, Canada, Poland, Australia, U.S.) along with behemoth defense contractors (e.g., HII (formerly Huntington Ingalls Industries) (HII-NYSE, not rated), Lockheed Martin (LMT-NYSE, NR), Teledyne Technologies (TDY-NYSE, NR)), there is no shortage of heavyweight industry validation supporting the Company’s technology and momentum.
“Management’s recent 2024 guidance communicating a midpoint of $95.0-milllion in annual revenues (with an associated 22-per-cent EBITDA margin) is multiples ahead of the $12.3-million generated in 2020 alongside negative EBITDA, building from a three-year compounded annual growth rate (CAGR) of nearly 80 per cent. With a towering sales pipeline in excess of $900-million in total contract value (TCV) and the Company firmly entrenched in multiple late-stage competitive bids representing substantial value, there is good reason to believe this lofty growth trajectory has considerable room to run. While Kraken shares have surged 200 per cent since August 2023, they remain attractively valued versus peers given the Company’s outsized growth and profitability.”
In a research report titled ‘Kraken’ the Code to Superior Underwater Imaging. Marine Robotics Demand Presents Whale of an Opportunity, Mr. Stevens said the St. John’s-based marine technology company is likely to benefit “compelling” industry dynamics and its ”high quality, defensive” customer base, noting 80 per cent of revenues come from defence agencies that possess non-cyclical budgets and the other 20 per cent stem from high repeat sales.
“The Company’s success and swelling scale have been aided by industry tailwinds seamlessly timed with Kraken’s investment and product development roadmap toward innovative new subsea offerings,” he said. “Furthermore, the vast marine robotics and services market is poised for long-run, sustained growth as technology advancements are enabling enriched subsea intelligence of largely unexplored oceans. Additionally, major inherent challenges operating underwater at depth contribute to meaningfully high barriers to entry and consequently, limited competition.”
Mr. Stevens set a Street-high target of $1.60 per share, implying total return upside of 52.4 per cent from the stock’s closing price on Wednesday of $1.05. The average is $1.43.