• Possible attack by Israel on Iran
• Situation in the region unclear
• Defense stocks benefit
In XETRA trading, HENSOLDT gained 1.02 percent to 37.58 euros, while RENK stocks rose by 0.28 percent to 28.31 euros by the end of trading. Shares in the drive technology specialist RENK have corrected by almost a third since their record high on April 2nd and are currently recovering somewhat. Only Rheinmetall saw a decline on Friday – by 1.25 percent to 504.00 euros – after Deutsche Bank canceled its buy recommendation the evening before. Analyst Christoph Laskawi raised his price target to 510 euros, but this is only around the current XETRA level. At its peak, Rheinmetall had already cost almost 572 euros at the beginning of April and has since corrected almost twelve percent.
Unclear situation after the night’s events
The background to the price gains in German arms stocks is the impending escalation between Israel and Iran. Explosions were reported in Iran during the night, and according to press reports, Israel is said to have attacked the country with rockets. Various media reported on the alleged military operation. However, Iran itself denied speculation about possible missile attacks and said that it was not a widespread attack, but rather “several small flying objects” that were “sighted and hit in the sky of Isfahan”.
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Investors are still stocking up on defense stocks
An escalation in the region has been one of the price drivers for shares in Rheinmetall, HENSOLDT and RENK for months. In addition to the conflict between Israel and Iran, there are other geopolitical flashpoints, including the one between Israel and the Gaza Strip and Russia’s military offensive in Ukraine, which has been ongoing since February 2022.
Against this background, defense stocks have been among investors’ favorites for some time. In recent trading days, there had been profit-taking at Rheinmetall & Co., but experts such as analyst David Perry from JPMorgan had pointed out that investors in particular should see price setbacks as opportunities for entry.
Deutsche Bank raises price target for Rheinmetall
Meanwhile, Deutsche Bank Research is less optimistic, at least when it comes to Rheinmetall. Analyst Christoph Laskawi has downgraded Rheinmetall from “Buy” to “Hold”, but raised the price target from 450 to 510 euros. He justified the downgrade with the sharp increase in valuation. Although the market is focusing on the medium-term prospects of the defense company, the first quarter is likely to have been good, he wrote in a study available on Thursday evening.
Moody’s confirms Rheinmetall’s rating at Baa2; Outlook stable
Moody’s credit rating for Rheinmetall has not changed. The defense company and auto supplier continues to be rated at Baa2 with a stable outlook. Rheinmetall delivered a robust operating performance in 2023, Moody’s said. The company will also grow significantly in the next few years. Despite the expected high investments, the debt ratio is likely to remain within the current rating category.
Editorial staff at finanzen.net with material from dpa (AFX) and Dow Jones
Image source: HENSOLDT, RENK Group AG