Mercury Systems: Upgrading To Buy As The Valuation Gap Reopens

What happened: Mercury Systems was upgraded to buy after a 23% stock decline and an improved FY27 outlook, with a base case price target of $99.30. Key numbers: 23% stock decline; $99.30 base case price target; Q1 FY27 organic revenue growth 12.4%; gross margin 35.2%; adjusted EBITDA up 59% to $56.4 million; record $2.06 billion backlog; 1.46x book-to-bill ratio. Why it matters: The record backlog and book-to-bill ratio support double-digit revenue growth and margin improvement guidance for FY27 and FY28, while management prioritizes debt reduction over buybacks. Coverage: 3 outlets in 24h

Mercury Systems was upgraded to buy after a 23% stock decline and an improved FY27 outlook, with a base case price target of $99.30.

The record backlog and book-to-bill ratio support double-digit revenue growth and margin improvement guidance for FY27 and FY28, while management prioritizes debt reduction over buybacks.