In Frankfurt Rheinmetall continues fall after JP Morgan axe

(Il Sole 24 Ore Radiocor) - Rheinmetall's stock skidded again on the Frankfurt Stock Exchange, under the weight of analysts' comments on quarterly accounts presented on Thursday. The German defence group dropped more than six points on the heels of a 7 percent loss on the eve of the trading after results came in below expectations, pushing the stock to the bottom of the DAX 40 index and also to the bottom of the Stoxx Europe. The main reason for this is the downgrade by analysts at JPMorgan, who reduced their target price for Rheinmetall from EUR 2,130 to EUR 1,500 and lowered their recommendation on the stock from 'Overweight' to 'Neutral'.

The US bank's experts remain optimistic about German defence spending and predict five years of strong growth for the group. At the same time, they point out that the stock is likely to face difficulties in the near future. On the one hand, it seems difficult for the company to meet its growth targets at the moment, as market expectations have not been met in four of the last six months, and they therefore consider a downward revision of earnings forecasts more likely than an upward one. Against this backdrop, JP Morgan cut its estimates to 2030 by almost 5%.

In addition, some investors are even starting to question Rheinmetall's product portfolio, notes the US bank, which, while not sharing these concerns, notes that they could hamper any short-term increase in the share price. For Alphavalue, which described Rheinmetall's quarterly accounts as 'mediocre', 'the execution engine has packed up' and the German group's 'equity story of success' is coming to terms with reality.

Although the EUR 73 billion order book looks reassuring on paper, the first quarter revealed operational hurdles on several fronts, Alphavalue notes. The top division 'Weapons and Munitions' naturally attracts attention: in addition to temporary administrative delays, the market is actively questioning the capacity of low-cost drones to cannibalise future demand for traditional 155 mm artillery due to their effectiveness on the battlefield. Amidst these questions about long-term demand, stalled partnerships and scaled-back mega-contracts, the smooth growth phase is officially over, write Alphavalue.