Given the stock valuations of European defense companies, there is greater downside than upside as 2025 approaches, Goldman Sachs writes in the analysis.
“We are in the midst of a defense investment supercycle, seeing a 50 percent increase in the real growth rate over the 2022-2027 period compared to 2015-2020,” Goldman Sachs analyst Victor Allard notes in the analysis.
Saab’s share was down 7 percent, Germany’s Rheinmetall fell by the same amount and France’s Thales, Italy’s Leonardo, Norway’s Kongsberg and Britain’s BAE were also clearly down in a synchronous movement in the European sector.
The price records in the sector have succeeded each other in recent years, pushing up the multiples to historically high multiples, due to the sharp increases in investment in defense equipment since Russia began the large-scale attack on Ukraine.
Goldman Sachs concludes that Europe as a whole will reach the NATO requirement of 2 percent defense investment as a share of GDP in 2025.
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