Rheinmetall's German Rocket Bet and a Shifting Analyst Landscape Leave the Stock Stuck Below €1,000

Rheinmetall and Lockheed Martin sign MOU for ATACMS rocket component production in Germany from 2027, but shares fall 1.7% as Jefferies downgrades sector stance amid valuation concerns.

Rheinmetall has inked a memorandum of understanding with Lockheed Martin to produce ATACMS rocket components at its Unterlüß site from 2027, a move that ties the German defence group directly into the strengthening of European munitions independence. Solid-fuel motors and other parts for the guided missiles — compatible with the HIMARS and M270 MLRS launchers — will be manufactured on German soil, though final assembly has not yet been officially confirmed. The timing aligns with NATO allies’ push to reduce reliance on third-party supply chains, and the partnership reinforces Rheinmetall’s ambition to become a pillar of modern artillery technology in Europe.

Yet the strategic news has done little to arrest the stock’s slide. Shares changed hands at €993.40 on Wednesday, a decline of roughly 1.7% from the prior close, and have now lost 37.97% since the start of the year. Over the past 30 days alone, the equity is down 16.91%, and it remains more than 50% below the 52-week high of €1,995 touched last year. The cushion to the 52-week trough of €902.50 has thinned to about 10%.

The immediate trigger for the latest leg lower came from the analyst desk. Jefferies reaffirmed its "Buy" rating on Rheinmetall with a €1,300 price target but stripped the stock of its sector-favourite status in favour of Italy’s Leonardo. Analyst Chloe Lemarie cited a shift in the bank’s valuation framework toward defence electronics and air defence — areas where Leonardo is stronger — while Rheinmetall remains heavily weighted toward land systems and munitions, a segment Jefferies sees offering less upside potential through 2028. The valuation gap underscores the point: Leonardo trades at an EV/EBIT multiple of around 14, while Rheinmetall’s forward P/E hovers near 101.

That valuation anxiety is not confined to Rheinmetall. The wider European defence sector is wrestling with a reassessment after panzer manufacturer KNDS postponed its planned initial public offering, blaming sector volatility. Institutional buyers balked at a valuation north of €12 billion, and the failed float has fuelled open debate about whether the defence industry has passed its peak. Despite its 51.81 billion euro market capitalisation, Rheinmetall’s recent price action reflects a market struggling to price in the order flow against stretched multiples.

On the operational front, the picture remains busy. Germany has finalised the purchase of US-made Tomahawk cruise missiles, a deal confirmed by Chancellor Friedrich Merz on the sidelines of the NATO summit in Ankara. The alliance unveiled fresh procurement commitments worth more than $50 billion, with $40 billion earmarked for drone-defence systems over the next five years. Rheinmetall’s existing backlog continues to grow, and new production capacity — such as the Unterlüß line — is designed to capture that demand.

Technically, the stock is in a clear downtrend. The Relative Strength Index sits at 37.2, pushing toward oversold territory, but the price remains 14.99% below the 50-day moving average and 34.55% below the 200-day average. Annualised volatility of 68.82% underlines the extreme swings in the name. The immediate chart support at €902.50 will be critical; a breach there would open further downside. The coming quarterly results will test whether operational growth can still justify a valuation that has already shed almost two-fifths of its value this year.