Should you sell your Kraken Robotics stock?

Citing increased valuation risk and a more balanced near-term risk-reward profile following a sharp run-up in the shares, National Bank Financial analyst Mike Stevens downgraded Kraken Robotics (Kraken Stock Quote, Chart, News, Analysts, Financials TSXV:PNG) to “Sector Perform” from “Outperform” on Jan. 15.

At the same time, Stevens raised his target price to $8.75 from $7.50. The Street average target is $6.50.

The downgrade follows Kraken’s January 13 premarket announcement of $35-million in battery sales to three unnamed customers, which Stevens described as a positive development. However, he said the rating change primarily reflects the need for the market to digest the company’s recent share price appreciation, with the stock up 36% year-to-date after a 133% gain in 2025.

As reported by the Globe and Mail, Stevens attributed much of the recent momentum to renewed investor enthusiasm around defence spending, following bullish commentary from U.S. President Donald Trump amid heightened global geopolitical tensions.

“We emphasize that Kraken continues to demonstrate strong operational execution and our move does not reflect any change to our long-term thesis for the company,” Stevens said. He added that his core view remains centered on Kraken’s differentiated product portfolio and favourable industry tailwinds supporting demand across its subsea power, SAS sensors and platforms, and commercial services businesses.

Stevens said his multi-stage discounted cash flow model assumes average annual growth of nearly 35% through 2030, broadly in line with Kraken’s own expectations on an organic basis. On profitability, he expects EBITDA margins to expand modestly toward 25% over that period.

He also pointed to Kraken’s defence opportunity set, noting a pipeline now exceeding $2-billion, which he believes has likely grown since the company’s last update in early 2025. Stevens said that even focusing only on defence programs tied primarily to Kraken’s KATFISH and SAS products, individual multi-year contracts can generate between $20-million and $150-million in revenue over two-to-three-year terms.

“When factoring in the company’s battery prospects alongside a growing unmanned underwater vehicle market, there is no shortage of opportunities ahead to sustain and potentially accelerate this pace of growth,” Stevens said, adding that his current assumptions remain reasonable in the absence of a near-term fundamental catalyst.

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