Applied Aerospace & Defense is in the rare position of supplying SpaceX. The stock has other things going for it, as well. By Al Root
Investors keen on getting exposure to space but unconvinced about the prospects for SpaceX still have options. One just so happens to be a supplier to Elon Musk's trillion-dollar rocket and artificial-intelligence company: Applied Aerospace & Defense.
A few factors have left shares disconnected from fundamentals. As the background issues fade, its stock can rise 40% over the coming year.
Applied Aerospace is a midsize supplier to the aerospace and defense industry, formed in 2025 through the merger of Applied Aerospace Structures and PCX Aerosystems. It builds hardware for space, missiles, and drones.
Sales in 2026 are expected to be about $675 million, up 35% year over year. Earnings before interest, taxes, depreciation, and amortization, or Ebitda, are expected to be about $150 million.
The company also finds itself in the rare position of being a SpaceX supplier, shipping landing hardware for the Falcon 9 rocket. It isn't easy to identify SpaceX suppliers. Musk's company does most of its manufacturing on its own. RBC Securities analyst Ken Herbert estimates that about 90% of SpaceX hardware is built in-house. For point of comparison, that number for Boeing would be closer to 40%.
SpaceX's vertical integration highlights a problem for the industry, which Applied Aerospace plans to solve. "There's not enough advanced manufacturers of highly complex systems," says CEO Trip Ferguson, an ex-Marine who came to Applied from AeroVironment and who once served as the chief operating officer of BlueHalo, which AeroVironment acquired in 2025. "We have decided to focus on space and launch, defense aviation, [intelligence], and precision strike."
His company makes everything from solar arrays and propellant tanks for spacecraft, flight control surfaces for unmanned aircraft and missiles, and power transmission products for helicopters, among many other things.
"Its biggest asset is scale, creating a one-stop shop for primes and defense tech companies alike to get proven consistent performance at a competitive price point," says Jefferies analyst Sheila Kahyaoglu.
Bringing advanced manufacturing capabilities to the U.S., while serving growing businesses such as space and autonomous weapons, feels like a recipe for stock market success. That hasn't been the case, though.
Applied sold shares in a June initial public offering at $20, raising about $650 million. That was mainly used to repay debt amassed as private-equity owner Greenbriar Equity built the company via acquisition. Shares traded as high as $24.24 shortly after the deal, but have failed to maintain altitude, closing below $17.50 apiece on Wednesday.
Greenbriar's ownership is one issue that has weighed on investor sentiment. It still owns about 75% of the shares outstanding. Greenbriar is likely to sell eventually, and selling a lot of anything can drive down the price.
SpaceX's performance has also been a problem. Shares are trading around $115, down almost 50% from a post-IPO high of nearly $226 per share, and well below the $135 IPO price. That peak-to-trough decline wiped out about $1.5 trillion in market value and took several other space-related stocks with it. Rocket Lab and AST SpaceMobile have both dropped roughly 40% since SpaceX's IPO. Defense sector multiples have also contracted, says Bank of America analyst Ron Epstein. Through Tuesday trading, shares of drone defense technology company Kratos Defense & Security Solutions, for instance, were down 30% over the past three months.
The headwinds have been significant, but Applied Aerospace & Defense shares now reflect a lot of bad news. That can be an opportunity.
BofA's Epstein rates the shares Buy. His price target is $24, up 40% from recent levels. A backlog north of $1 billion gives the company "visibility on growth in the near term," he says, while the company's "embedded" positioning with its customers supports "confidence in growth estimates." Applied Aerospace is sole-source on more than 80% of its contracts.
Kahyaoglu's price target is $25. She recently met with management at the biennial Farnborough Airshow outside of London, gaining confidence in Applied Aerospace's missile and space products.
Their view isn't unique on the Street. Overall, six of seven analysts covering the company have a Buy rating on the shares. The average Buy-rating ratio for S&P 500 stocks typically ranges from 55% to 60%. The average analyst price target for Applied Aerospace & Defense stock is about $25.
The $25 price values the company at about $4.7 billion, or about 29 times Ebitda expected over the coming 12 months. Aerospace companies in the Russell 1000 trade for about 20 times Ebitda. Of course, that's based on the analyst price targets. Shares currently trade for about 21 times Ebitda. That's a small premium to peers, considering Applied Aerospace & Defense is expected to grow sales at a midteens annual rate through the end of the decade. What's more, growth can be supplemented by bolt-on mergers and acquisitions.
To be sure, investors face some risk from higher oil prices, which tend to drive down shares of aerospace players. And SpaceX stock will continue to catch other space-related companies in its massive trillion-dollar wake. Investors will also endure more volatility as Greenbriar's stake unlocks near the end of 2026. But those aren't reasons to avoid the stock altogether. Sometimes risks loom so large that investors forget about the potential reward.
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July 24, 2026 21:31 ET (01:31 GMT)
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