Fresh off of its initial public offering, aerospace and defense manufacturer Arxis is set to outperform the market, according to Wall Street. Bloomfield, Connecticut-based Arxis, a maker of electronic and mechanical components, surged more than 38% on its Nasdaq debut on April 16. While the stock is off 9% since then — still above its $28 IPO — banks across Wall Street began research coverage on Monday and see more upside ahead. Goldman Sachs, which led the Arxis IPO, has a buy rating and a $53 price target, representing a nearly 51% gain from Friday's close. Analyst Noah Poponak said the company's history of mergers and acquisitions is attractive. "Since 2019, Arxis has completed 32 acquisitions, averaging over five per year — a higher pace of M & A than other [aerospace and defense] compounders," he wrote. "This is a compelling model to operate in the sector, and each deal has the potential to create value, meaning the more per year the more upside potential." Poponak added that Arxis has greater exposure to the defense sector compared to many of its aerospace peers, which is tailwind when military spending is rising . Morgan Stanley, the second lead manager on the Arxis IPO last month, also has a buy rating on the stock and a $44 price target, implying 25% move higher from Friday's close. Arxis has a "durable moat," which gives it strong pricing power and margins, analyst Kristine Liwag said. A vast product portfolio also makes Arxis attractive, Liwag said. "Arxis provides broad-based exposure to positive tailwinds in defense & space, commercial aerospace, and specialized industrial technology," she wrote. "The company's significant diversification means that it has limited exposure to platform-specific risk and is able to benefit from broad-based trends across its end-markets."
