This Next-Gen Defense Stock Is Down 57% and Could Be a Screaming Buy

Kraken Robotics (OTC: KRKNF) is a Canada-based company that develops and manufactures marine technologies. In addition to subsea batteries used in underwater drones, the company produces sonar systems and other sensors that provide information about the ocean floor and the movement of objects underwater. While the defense industry is the company's biggest market, its technologies are also used in the offshore energy industry.

Spurred by excitement surrounding next-gen defense stocks and the announcement of the company's acquisition of Covelya Group, Kraken stock hit a lifetime high of $8.13 per share in March 2026 -- but the stock has struggled in subsequent trading. As of this writing, Kraken trades down 57% from its high. Is the stock a buy right now?

As a relatively small company serving the defense and offshore energy industries, Kraken tends to have lumpy revenue recognition. The business's revenue grew just 4% year over year in the second quarter, and the company's management team indicated that sales performance is going to be heavily weighted toward the fourth quarter this year. In addition to investors being kept waiting for that crucial business update, the market is concerned about integration risks following the company's acquisition of Covelya.

While Kraken stock carries significant risk even after its large valuation drawdown, I think it stands out as a smart buy for long-term investors at these levels. The market for underwater drones and other subsea technologies is still in its infancy, and Kraken's technology stack gives it multiple ways to win as the space continues to develop. With strong positions in battery technology, sensors, and software and support services, the company could still be in the relatively early stages of a huge growth story.

Keith Noonan has positions in Kraken Robotics. The Motley Fool has positions in and recommends Kraken Robotics. The Motley Fool has a disclosure policy.