Wall Street analysts have cast doubt on a rally for defense stocks despite Donald Trump failing to rule out using military action to seize Greenland while simultaneously urging European allies to spend more to defend themselves.
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In light of these concerns, Lockheed Martin (LMT) received a double price target downgrade today. Additionally, targets for RTX (RTX) and Northrop Grumman (NOC) were also trimmed by analysts at Susquehanna.
Furthermore, on Tuesday, President-elect Donald Trump reiterated his desire to take over Greenland, an autonomous Danish territory, while also calling on European Union countries in NATO to spend 5% of their GDP on defense.
Defense Stocks Fall Under Analysts’ Crosshairs
Defense stocks have been a popular play in the Trump trade since before his election victory. In particular, faced with pressure to spend more and with the Ukraine war still raging, the latest comments have further ignited a rally for a number of European defense stocks, such as Germany’s Rheinmetall (RNMBY) and the UK’s BAE Systems (BAESF).
But analysts at Susquehanna and Wells Fargo reckon there is perhaps a bit less upside for some of the U.S. stocks that make up a number of Defense ETFs, including the iShares U.S. Aerospace & Defense ETF (ITA).
In a note on LMT, Wells Fargo analyst Mathew Akers warned that funding concerns and DOGE (Department of Government Efficiency) risk will remain an overhang for the stock. He notes that the company’s Fiscal Q4 is unlikely to offer much clarity on the path forward and lowered his price target on the stock from $543 to $500, while maintaining a Hold rating. However, he raised his price target on RTX to $151 from $140, maintaining a Buy rating.
Meanwhile, Susquehanna analyst Charles Minervino lowered his price target on LMT to $590 from $695, though this still implies considerable upside from today’s price. He also lowered the firm’s price target on RTX to $139 from $150 and his NOC price target to $557 from $625.
Trading in the three U.S. stocks was mixed at the open on Wall Street on Wednesday.
Investors looking to track different Defense Sector ETFs can look at the TipRanks Compare Defense ETFs tool.
