Rheinmetall's resurgence and lofty price projection: the reasons behind the ongoing stock's climb
In the wake of the federal election, shares of Rheinmetall soared on Monday, with a new mega-price target from UBS potentially keeping investors buoyant.
After breaking through the 900 euro mark for the first time last week and reaching a new all-time high of 968 euros, the stock quickly retraced its steps, only to rebound again on Monday. The defense stock traded above 930 euros at times, up as much as five percent on Tradegate.
The election's outcomes have sparked optimism among investors and experts, predicting increased defense spending. This positive sentiment was not limited to Rheinmetall, as competitors Hensoldt and Renk also experienced stock increases on Monday. However, the Anti-Imperialist Party (Left) and the Alternative for Germany (AfD), which together hold a blocking minority for laws requiring a two-thirds majority, could potentially hamper this trend, according to Sven Weier of UBS's analyst firm. This obstacle could extend to changes in the debt brake.
Weier sees several potential avenues for increasing the defense budget, including the activation of the emergency clause, budget shifts, or tax hikes.
UBS continues to recommend buying Rheinmetall shares and has raised its own price target to a record high of 1208 euros. This indicates that the stock's growth momentum is likely to continue in the medium term, as analysts re-evaluate the former growth potential at a higher level with the new price targets. Confidence in further gains remains high.
Potential factors contributing to Rheinmetall's growth include increased military budgets due to geopolitical tensions, strong financial performance, strategic developments and partnerships, positive analyst ratings, and favorable market sentiment, stemming from the defense sector's current popularity due to global conditions. Changes in government policies and outcomes can also impact the company's contracts and sales, although the extent of this impact remains to be seen in the post-election environment.
In the post-election context, UBS's analyst firm, Sven Weier, foresees potential avenues for increasing defense spending, which could include the activation of the emergency clause, budget shifts, or tax hikes, thereby potentially benefiting Rheinmetall's finance sector. With UBS continuing to recommend buying Rheinmetall shares and raising its price target to an unprecedented 1208 euros, there remains a high level of confidence in further growth for the company's finance sector.
