This year, European defence stocks have skyrocketed amid a regional push towards increasing defense spending, but Bull Run could soon be out of steam, according to investment bank Citi. The Stoxx Europe Aerospace and Defense Index has been garnering nearly 50% since the start of the year, with a small number of stocks more than doubled in value, including Germany’s Renk, Rheinmetall and Hensoldt. The rally, supported by actions from the European government, by raising the defence budget, the EU has pledged to mobilize 800 billion euros ($928 billion) for security spending, but the UK government said earlier this year that it will allocate more money to the defence. In a note to clients on Monday, City’s European aerospace and defense analyst Charles Armitage gave the Serves “sell” ratings from Hensold, Lenk and Swedish. This year, stock prices have been won around 174%, 260% and 110% respectively. HAG-DE R3NK-FF, SDV0-FF YTD line prices Hensoldt, Renk and Saab have been sharing since the beginning of the year. Armitage argued that the Hague summit was “the better it can get for the Western European aerospace and defense industry.” His memo was published before confirming that 32 members of NATO had pledged to invest 5% of their gross domestic product in defense by 2035, but Armitage, as well as the wider market, had anticipated this move. Under the contract, 3.5% of NATO members’ GDP is set to be assigned to “pure” defense requirements, with an additional 1.5% heading towards security and defense-related infrastructure. Regional defense stocks still rose on Thursday, with the Stoxx Aerospace and Defense Index rising 1.5% the day after NATO’s annual summit in The Hague, Netherlands. Armitage estimated that his team “has more growth pricing than what appears to be 3.5% of GDP, even assuming market share profits.” “We believe that these have very few benefits [NATO spending] “But there are some drawback risks, but some drawback risks,” he said. Last week, Bank of America downgraded Lenk and Sub. [November Capital Markets Day]”At Saab, Boa analysts said investors argued that Saab’s valuation is too rich in the short term “for businesses with limited medium to long term (VS peers)” and limited exposure to non-Sweden European budgets and regional peers.
