Merlin Labs is undervalued, this analyst says

Roth Capital Markets initiated coverage of Merlin Labs (Merlin Labs Stock Quote, Chart, News, Analysts, Financials NASDAQ:MRLN) with a “Buy” rating and a $15.00 target, saying the company offers differentiated exposure to autonomous aviation through its AI-enabled pilot software and hardware platform.

In an April 13 report, analyst Suji Desilva said Merlin’s aircraft-agnostic system is designed to bring takeoff-to-touchdown autonomy to both military and commercial fixed-wing aircraft, reducing crew intensity and supporting next-generation cockpit intelligence.

“Longer-term, we believe MRLN can establish itself as an aerospace ‘neoprime’ that is driving the steady upgrade of aircraft and aviation capabilities across the industry toward next-generation autonomous flight,” he said.

Desilva said Merlin’s growth outlook is supported by a growing base of defence and commercial relationships, including freight customers and partnerships with major aerospace primes. He expects revenue over the next several quarters to be driven by milestone progress on the company’s lead defence programs for the C-130J and KC-135, with the C-130J alone representing more than $100-million in contract value and providing backlog visibility for roughly the next year and a half. He added that Merlin also has about $3-billion of additional pipeline opportunities.

Desilva said his $15.00 target is based on 35 times his 2027 revenue estimate of $55-million, a premium to peers trading closer to 6 times EV/sales, which he said reflects Merlin’s higher growth profile. He said the main risks include execution on the C-130J program, limited fleet expansion beyond initial aircraft, slower conversion of pipeline opportunities into signed contracts, and challenges expanding beyond defence into civil aviation.

Merlin, founded in 2018 and based in Boston, develops AI-powered autonomy systems for legacy and next-generation aircraft and has completed hundreds of autonomous flights across global test sites.

Desilva said the company should post an Adjusted EBITDA loss of $49.3-million on revenue of $25.5-million in fiscal 2026, improving to an Adjusted EBITDA loss of $42.6-million on revenue of $55.0-million in fiscal 2027.

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