Bernstein Trims Rheinmetall Target but Backlog and Geopolitics Keep the Bull Case Alive

Bernstein cuts price target but reiterates outperform on Rheinmetall; stock overbought near €1,221 but backlog hits €73bn record with strong geopolitical demand.

The stock has lost nearly two-fifths of its value since September’s all-time high, yet the analyst community is not abandoning ship. Bernstein Research on Friday cut its price target on Rheinmetall from €2,050 to €1,900 — a reduction of roughly 7.3% — while reaffirming its “outperform” rating. Analyst Adrien Rabier cited a shift in investor sentiment within the defence sector, with capital increasingly rotating toward drone warfare and away from traditional armaments in the near term. A mild miss on last quarter’s revenue expectations relative to the market’s lofty forecasts added to the pressure.

Friday’s close of €1,221.40 represented a weekly gain of nearly 9%, but the recovery remains fragile. That price still sits almost 39% below the 52-week peak of €1,995 touched in September 2025. From the year’s low of €1,118 recorded in mid-May, the stock has clawed back only about €100. Technical indicators flash a warning: the relative strength index stands at 85.6, firmly in overbought territory, suggesting the short-term bounce may lose steam without fresh catalysts. Key moving averages lie well overhead — the 50-day at €1,410 and the 200-day near €1,644 — underlining how far the equity must travel to regain its upward trend.

None of the share-price weakness reflects the state of the order book. Rheinmetall’s backlog has ballooned to roughly €73 billion, a record that secures capacity utilisation in its core vehicle systems and weapons and munitions divisions for years to come. Management has guided for group sales of between €14.0 billion and €14.5 billion in 2026, with an operating margin of around 19%. The dividend for the 2025 fiscal year was raised to €11.50 per share from €8.10, yielding barely 1% at current levels but signalling the company’s willingness to return cash even as it invests heavily in capacity expansion.

Geopolitical events continue to provide the structural tailwind that underpins the bull case. Recent attacks on Kyiv involving hundreds of drones and cruise missiles, alongside the deployment of new systems such as the “Oreshnik” rocket, underscore why European governments remain under intense pressure to boost spending on air defence and counter-drone capabilities. Rheinmetall’s Skynex and Iris-T product lines stand to benefit directly from this enduring demand. The expected price-to-earnings multiple for 2027 sits at roughly 22 — a reasonable valuation for a company with such a deep order pipeline, analysts argue.

A less obvious thematic link also emerged in the second source: the defence-modernisation push — encompassing drones, electronic warfare and mobile energy systems — is fuelling demand for critical raw materials, notably graphite. Institutional investors are increasingly connecting the dots between Rheinmetall’s fortunes and the resilience of its supply chain for specialised materials. The defence boom is no longer viewed as a cyclical spike but as a structural shift, with supply security joining price and efficiency as a core procurement criterion.

The next major test for the stock will come with the second-quarter results, which Rheinmetall itself has flagged as the period into which delayed revenues from the first quarter have been pushed. If that delivery materialises as promised, the market may reconsider the growth trajectory. What would truly reignite the rally, however, are new large-scale orders from NATO allies. Bernstein’s Rabier made clear that the current valuation already embeds significant upside potential — provided the order intake surprises positively in the coming months. Until then, the stock remains a play on patience, with a €73 billion backlog as its ultimate safety net.