As global defence spending strategies intensify, driven by geopolitical shifts and national security priorities, select TSX-listed companies are drawing significant analyst attention for their potential to capitalize on this trend. Notably, Kraken Robotics Inc. and Calian Group Ltd. have been highlighted by financial experts as prime beneficiaries, with recent developments and strategic positioning underscoring their growth prospects in an expanding defence market.
Kraken Robotics: A Deep Dive into Defence Opportunities
St. John’s-based Kraken Robotics Inc. (PNG:TSX) has emerged as a compelling investment opportunity within the defence sector, particularly in marine technology. Benoit Poirier, an analyst at Desjardins Capital Markets, noted on May 28 that Kraken and Covelya Group Ltd. — which Kraken announced it was acquiring in March — have collectively secured orders worth approximately $40 million over a month and a half. This surge in business follows the United States Navy’s mine-clearing operations in the Strait of Hormuz, signaling robust demand for advanced subsea capabilities.
Poirier described the opportunity as “one of the most compelling in our coverage,” setting a price target of $14 for Kraken. This figure significantly surpasses the Bloomberg-compiled 12-month consensus price target of $10.80 from five analysts. Kraken shares closed Friday at $7.44. The analyst further suggested that Kraken, especially post-acquisition of Covelya, which boasts growing exposure to the defence sector, appears to be trading at an “unjustified” 60 per cent discount when projecting today’s performance to 2028, compared to its drone and defence industry peers.
ATB Cormark Capital Markets also has Kraken on its radar, indicating in a recent note that the company is likely a contender to be named a “maritime robotics champion” by Ottawa’s Defence Advisory Forum. However, ATB Cormark acknowledged potential competition from Norway’s Kongsberg Maritime AS (KMAR:NO), a manufacturer of underwater autonomous vehicles, parts of which could be built in British Columbia. ATB maintains a price target of $6.50 for Kraken.
Calian Group: Leveraging a Shifting Defence Landscape
The broader shift in Canada’s defence spending priorities and timetables, recently promoted by “Prime Minister Mark Carney” at CANSEC — Canada’s leading defence conference — is also creating significant opportunities for other TSX-listed entities. ATB Cormark Capital Markets, whose analysts attended the event, identified Calian Group Ltd. (CGY:TSX) as a primary pick to benefit from these changes. The CANSEC event itself was described as the “largest event in its history with 300 exhibitions and over 100 delegations.”
ATB has set a price target of $98.50 for Calian, whose shares closed Friday at $92.13. The firm believes Calian is well-positioned to leverage the defence push across its diverse segments. This includes its composite materials unit, global navigation satellite systems, and a new application developed for the Canadian Air Forces (CAF). This CAF application is designed to bridge communication networks, sensors, and data flows, showcasing Calian’s proactive approach. ATB noted, “Our read on this product is that it was very much CGY proactively leveraging its position as a leading Canadian vendor to the CAF to add value where it’s needed.” According to Bloomberg, seven analysts have a 12-month price target of $93.21 for Calian.
Big Banks See Price Target Hikes Post-Earnings
Beyond the defence sector, Canada’s major financial institutions recently concluded their second-quarter earnings season, prompting analysts to maintain or adjust price targets for the Big Six banks. Gabriel Dechaine at National Bank of Canada Capital Markets maintained a $271 price target for Royal Bank of Canada (RY:TSX), which closed Friday at $264.44 after increasing its dividend by seven per cent and repurchasing seven million shares.
Dechaine also hiked his price target for Toronto-Dominion Bank (TD:TSX) to $162 from $157, citing improved financial performance in Canadian banking as “an important stock driver.” TD shares closed Friday at $157.75. Darko Mihelic, an analyst at RBC Capital Markets, raised his price target for Bank of Montreal (BMO:TSX) to $230 from $205, following stronger-than-expected earnings results, with shares closing at $223.93.
Mihelic also expressed a “positive view” on Canadian Imperial Bank of Commerce (CM:TSX) results, noting core earnings per share (EPS) and net interest income both surpassed estimates, while provisions for credit losses (PCLs) came in below estimates. He increased CIBC’s price target to $167 from $147; shares closed at $150.49. For Bank of Nova Scotia (BNX:TSX), Sohrab Mohavedi at BMO Capital Markets maintained a $101 price target on a “slight beat” on operating EPS, with shares closing at $110.62. National Bank of Canada (NA:TSX) saw its price target maintained at $214 by Mike Rizvanovic at Scotia Capital Markets, who described the quarter as “decent,” boosted by financial markets, as shares closed at $201.34.
The confluence of increased global defence spending and strategic initiatives by key players like Kraken Robotics and Calian Group positions these TSX stocks for potential upside. While the broader market, including the Big Banks, continues to navigate its own dynamics, the focused attention on defence-related enterprises suggests a significant investment theme emerging for the foreseeable future.
