Mercury Systems (NASDAQ:MRCY) has delivered a solid Q2 FY2025 report. It was quite an improvement over earlier reports and Wall Street seems very happy. So much so that the stock is 18.6% today and analysts are starting to hike their price targets. Is it still a buy? Here’s what you need to know:
Mercury Systems posted $223.1 million in sales, up 13% year-over-year. This surpassed analyst estimates of $182.4 million. The company still posted a GAAP net loss of $17.6 million, but it narrowed markedly from its $45.6 million loss in the year-ago quarter.
Adjusted EBITDA also made a turnaround to $22 million from a negative $21.3 million a year ago. Bookings reached $242.4 million and the backlog grew 6% year-over-year to $1.4 billion, along with $81.9 million of FCF (less capital expenditures for property and equipment). FCF was $44 million a year ago.
Analysts seem quite bullish and price targets have been raised in accordance with the stock’s rise. Baird upgraded from $37 to $58, RBC raised its target from $35 to $44, and Raymond James hiked theirs from $40 to $50.
Regardless, the stock is now at $49.58 and the consensus price target now still implies 15.21% downside risk.
The company’s Q2 results suggest a turnaround in progress and the market has already priced in that progress. Of course, it could still go higher in the coming quarters, but there’s a lack of formal guidance and MRCY stock has a history of bouncing up and down.
Still, analysts see breakeven in FY2025 and profits in FY2026. It trades at 114 times forward 2025 earnings and 44 times forward 2026 earnings right now, so it would require consecutive stellar earnings beats for MRCY to keep its momentum in the long run. You should only buy if you think that will be the case.