Rheinmetall’s Japan Gambit and Tank Reveal Leave Stock Stuck in a 40% Rut

Rheinmetall's CEO pushes for global AI weapons regulation and a Japan production base, but the stock has fallen 40% from its peak despite a €73bn order backlog and analyst endorsements.

Armin Papperger is trying to rewrite the Rheinmetall story on two fronts at once. The chief executive used the Eurosatory defence show in Paris to call for global rules on artificial intelligence in weapons systems — drawing a parallel with nuclear arms regulation — while reports from Nikkei revealed he is plotting a production base in Japan. The message is clear: Rheinmetall wants to be seen as both an ethical player and a truly global arms manufacturer. Investors, however, are not yet buying the narrative.

The stock closed at €1,200.20 on Friday, a modest gain on the day but still almost 40% below the all-time high of €1,995. Since the start of the year, the shares have shed about a quarter of their value. The sell-off has been relentless, and the company’s operational strength has done little to slow it.

Rheinmetall’s first-quarter numbers were solid rather than spectacular. Revenue came in at €1.94 billion, up 8% year on year, but analysts had pencilled in growth of nearly 15%. The management stood by its full-year guidance of between €14 billion and €14.5 billion in sales — a jump of up to 45% — backed by an order backlog that now tops €73 billion. That kind of visibility has kept analysts on side. Barclays recently reiterated its “overweight” rating with a €2,035 target, and the consensus price estimate among analysts stands at €1,882. Not a single broker recommends selling the shares.

Berenberg has a more modest target of €1,750 but remains constructive. The disconnect between the underlying business and the market’s mood is stark. On the one hand, the company is unveiling new hardware: at Eurosatory, its joint venture with Leonardo, Leonardo Rheinmetall Military Vehicles, presented the first prototype of the Italian Main Battle Tank. Based on the Panther KF?51 platform, the IMBT packs a 120 mm smoothbore cannon, an airburst-capable remote weapon station, and a fully digital architecture. It is designed to replace the Ariete tanks that have served the Italian army since the 1990s.

On the other hand, the stock is plumbing technical depths. It trades about 6% below its 50-day moving average and a long way from the 200-day line at €1,584.94 — a level that would still represent a recovery of more than 30% from current prices. The downtrend has been intact since last autumn, and it has wiped out nearly half the company’s market value.

Papperger’s Japan push is the most concrete attempt to change the narrative. According to the Nikkei report, Rheinmetall plans to set up a joint venture with a local partner to manufacture defence equipment in Japan. The company is currently known there mainly as an automotive supplier, but rising geopolitical tensions across the region make the timing opportune. The move would transform Rheinmetall from a European heavyweight into an Asia?Pacific player, opening up new export channels as well.

The call for AI regulation is subtler but equally strategic. Environmental, social and governance criteria are gaining weight in the defence sector, and early adoption of ethical standards can unlock capital from institutions that might otherwise shy away. Papperger’s comparison to nuclear arms control was aimed squarely at that audience.

In the coming weeks, however, investors will demand more than vision. The extraordinary general meeting of Electro Optic Systems — another stock covered in the primary article, but not relevant here — is not the focus. For Rheinmetall, the next catalysts are concrete contracts tied to the Japan venture and the second?quarter results due later in the year. Only those numbers can prove that the combination of hardware and systems integration is translating into cash flow. Until then, the gap between the company’s ambitions and its share price looks set to persist.