MDA wins huge price target raise at RBC

Count RBC Capital Markets analyst Ken Herbert among the believers in MDA (MDA Stock Quote, Chart, News, Analysts, Financials TSX:MDA).

Prime Minister Mark Carney, last month following a NATO summit in the Netherlands, confirmed that Canada would join other countries in raising defense spending to five per cent of its GDP within a decade.

“We are protecting Canadians against new threats. I wish we didn’t have to… but we do have to and it is our core responsibility as government,” Carney said.

Herbert says this action should trickle down directly to MDA.

“While investor concerns about FY27 defence growth are legitimate, we believe the 12-per-cent growth in the FY26 total Department of Defense (DoD) spending (22-per-cent growth in investment spending), coupled with a greater focus on low-cost, disruptive technologies and evolving purchasing requirements, will continue to favor small cap defence stocks over the defence primes,” he wrote in a July 3 report.

As reported by the Globe and Mail, Herbert maintained his “Outperform” rating while raising his price target on MDA from $35.00 to $42.00.

“We believe the company will continue to benefit from the positive re-rating across small-cap defence and space companies,” Herbert added. “The company remains on track to increase its production capacity on satellites to 2/day with the expansion of its Montreal facility. Company management remains hopeful that they will receive 1-2 large constellation orders by the end of the year, which we would view as a large, positive catalyst for the stock. We continue to view incremental order activity as the most critical factor for sentiment on the stock. We also believe MDA will continue to benefit from a scarcity of pure-play, publicly traded space stocks.”