Aerospace and defense maker Arcsys just completed an initial public offering and is expected to outperform the market, according to Wall Street. Arcsys, an electronic and mechanical parts maker based in Bloomfield, Conn., soared more than 38% on April 16 when it went public on the Nasdaq. The stock has fallen 9% since then, but is still above its $28 IPO, but banks across Wall Street began research coverage on Monday and expect more upside ahead. Goldman Sachs, which led Arcsys’ IPO, has a buy rating and a $53 price target, representing an increase of nearly 51% from Friday’s closing price. Analyst Noah Poponak said the company’s history of mergers and acquisitions is fascinating. “Since 2019, Arcsys has completed 32 acquisitions, averaging more than five per year, a higher rate of M&A than any other (aerospace and defense) conglomerate,” he wrote. “This is an attractive model for operating in this space, meaning each deal has the potential to create value, and the more deals we do in a year, the more upside potential there is.” Poponak added that Arcsys has greater exposure to the defense sector than many aerospace companies, and is benefiting from rising military spending. Morgan Stanley, the second lead underwriter for last month’s Arcsys IPO, also rates the stock a buy and has a price target of $44, implying a 25% upside from Friday’s closing price. Analyst Kristin Liwag said Arcsys has a “durable moat” that gives it strong pricing power and profits. Liwag said Arxis’ vast product portfolio is also appealing. “Arxis has broad exposure to positive tailwinds in defense and space, civil aerospace, and specialty industrial technology,” she wrote. “The company’s significant diversification means it has limited exposure to platform-specific risks and can benefit from broader trends across end markets.”
