Fall in Rheinmetall's share price places it among top DAX performers with price decreases
The shares of Rheinmetall, a leading German defence company, took a significant dive on Thursday, following the release of its Q2 2025 results. The stock, which was the worst performer in the German benchmark index DAX, dropped by eight percent, reflecting investor concerns over near-term growth.
However, the company reaffirmed its full-year guidance and highlighted a very strong order backlog of €63 billion, about six times its annual sales, which supports a positive medium-term outlook. The revenue miss is attributed primarily to delayed order placements due to Germany’s post-election budget approval delays, rather than reduced demand, with order flow expected to pick up substantially in the second half of the year once political processes conclude.
David H. Perry, an analyst at JPMorgan, sees significant potential in Rheinmetall's stock, with a price target of 2,250 euros. He describes Thursday's price drop as a "very attractive entry point." Sven Weier, an analyst at Swiss bank UBS, maintains a "Buy" rating and a price target of 2,200 euros for Rheinmetall's stock.
While near-term stock performance reflects disappointment over the Q2 earnings miss and delayed order intake, the longer-term outlook remains constructive due to a robust backlog and strong structural growth drivers in European defence spending. Investors appear to be awaiting the expected contract acceleration in H2 before fully repricing the stock higher.
Rheinmetall has already prepared for increasing orders in the remainder of the year and has increased its inventory. The company remains optimistic, expecting strong demand due to decisions made at the NATO summit in June and the planned buildup in Europe.
The geopolitical circumstances are unlikely to turn against defence spending, according to Sven Weier. David H. Perry does not expect the upcoming meeting between Donald Trump and Vladimir Putin to negatively impact planned German defence investments.
New records for Rheinmetall's stock are likely in the future, given the strong defence business and the expected positive news flow in the coming months. Despite the recent dip, Rheinmetall's stock currently ranks third in the DAX.
However, Rheinmetall is not alone in facing pressure after results. Companies like Renk and Hensoldt are also under scrutiny. The defence sector, while promising, seems to be facing a temporary lull due to political factors. As the political landscape clears up and defence budgets are approved, the sector is expected to rebound, making the current dip an attractive opportunity for long-term investors.
Finance experts David H. Perry and Sven Weier, respectively from JPMorgan and UBS, have indicated a positive medium-term outlook for Rheinmetall's stock, recommending investments as the company's strong order backlog and European defence spending growth drivers make it an attractive prospect. Concurrently, the defence sector appears to be experiencing a temporary lull due to political factors, such as budget approval delays, but is expected to recover once political landscapes clear up, making the current dip an enticing opportunity for long-term investors.
