Defense Stocks Under Pressure: Profit-Taking Takes Hold Amid Ongoing War Tensions

Defense stocks such as Rheinmetall, Renk, and Hensoldt have declined after a rapid record-breaking run due to profit-taking. The decline comes amid no hopeful news from the Ukraine and Middle East theaters of war and speculation about US military intervention in the Israel-Iran conflict. Analysts' price targets for Rheinmetall still suggest potential, with Exane BNP's target at €2,300.

Geopolitical tensions and the ongoing conflicts in Ukraine and the Middle East have led to a significant correction in defense stocks such as Rheinmetall, Renk, and Hensoldt. After a record-breaking run, these stocks have experienced a decline, primarily due to profit-taking and the lack of positive news from the war theaters. Analysts, however, remain optimistic about the long-term potential of these stocks, with Exane BNP's target for Rheinmetall at €2,300 [1].

Rheinmetall, a major player in the defense sector, has seen its stock price decline from a preliminary high of €1,942 to around €1,795, reflecting a decrease of over 200% from January 2025. The company's CEO, Armin Papperger, has been actively investing in the stock, purchasing shares at various price points, which has contributed to the stock's appreciation [1]. Despite the recent decline, analysts at Morgan Stanley predict the price could reach €3,000 by 2030, assuming European defense spending reaches the 3% of GDP target [1].

Hensoldt, a sensor solutions provider, has also seen its stock price fluctuate. After JPMorgan issued a "Buy" recommendation, the stock price surged to €108.80 before falling to €84. The company will be showcasing its latest innovations at the Paris Air Show 2025, highlighting its advancements in air defense, surveillance, and software-defined technologies [2]. While the stock has faced profit-taking, the company's strong focus on digitalization and operational readiness positions it well for future growth.

Renk, a special gear manufacturer, has seen its stock price fall due to downgraded ratings by Bank of America and BNP Exane. The company expects a significant growth in its defense share in the coming years, but the current geopolitical uncertainty has led to a decrease in investor confidence. The stock's valuation seems somewhat peculiar, with a 2025 P/E ratio of 52, which may not be justified given the current market conditions [1].

The correction in defense stocks comes amid speculation about US military intervention in the Israel-Iran conflict, which has added to the uncertainty in the markets. However, the ongoing demand for defense technologies, particularly in light of the Ukraine conflict, suggests that these stocks could rebound in the long term.

References:
[1] https://news.financial/comments/gaza-iran-ukraine-conflicts-are-driving-up-metal-prices-rheinmetall-european-lithium-hensoldt-and-renk
[2] https://www.marketscreener.com/quote/stock/HENSOLDT-AG-112902521/news/HENSOLDT-presents-state-of-the-art-technologies-at-Paris-Air-Show-2025-50251179/