Rheinmetall's Kraken Drones Roll Off the Line as a Stock at 52-Week Lows Poses a Riddle

Rheinmetall's shares tumble to €1,337.60 amid analyst downgrades and cash flow concerns, even as production of the Kraken K3 Scout ramps up and revenue guidance surges 40-45%.

The factory floor at Blohm+Voss in Hamburg is humming with activity as Rheinmetall begins serial production of the Kraken K3 Scout, an unmanned surface vessel capable of operating autonomously for up to 30 days at sea. Yet on the trading floor, the mood could not be more different. The defence group’s shares touched a fresh 52-week low of €1,337.60 on 29 April, closing at €1,357.80 — roughly a third below the September peak of €1,995 and down more than 15% since the start of the year.

The disconnect between operational momentum and market sentiment is stark. Rheinmetall’s order backlog stood at €63.8 billion at the end of 2025 and is expected to swell past €135 billion by the end of 2026. Management has guided for group revenues of €14.0 billion to €14.5 billion in 2026, representing growth of 40% to 45%, with an operating margin of around 19%. Crucially, 91% of that targeted revenue is already covered by existing contracts.

So why is the stock languishing? The trigger for the latest leg lower came from mwb research, which downgraded its assessment after Lockheed Martin’s weak quarterly numbers. The analyst’s core argument: Western defence budgets are shifting away from traditional land systems — Rheinmetall’s bread and butter — toward cruise missiles, air defence and autonomous platforms. The Weapons & Ammunition division, which is targeting €14 billion to €16 billion in revenue by 2030, relies heavily on 155mm artillery, and the analyst warns that industry-wide capacity expansion will eventually squeeze pricing.

The free cash flow outlook has also rattled investors. In March, Rheinmetall guided for a cash conversion rate of roughly 40% of operating profit, far below the 70% to 90% analysts had pencilled in. That gap sent the stock into a broad downtrend from which it has yet to recover.

The analyst community is deeply split. Goldman Sachs keeps Rheinmetall on its Conviction List with a €2,300 price target, arguing that the European rearmament cycle and expected annual earnings growth of at least 30% make the current valuation a buying opportunity. J.P. Morgan agrees, setting a €2,130 target. At the other end of the spectrum, mwb research has cut its target to €1,450 with a “Hold” rating, warning that the current valuation leaves no room for disappointment. Warburg Research sits in the middle with a €1,740 target and a “Hold” call. The consensus average stands at roughly €2,044.

On the production side, the news is unambiguously positive. The Kraken K3 Scout, developed jointly with Britain’s Kraken Technology Group, is a missile-armed autonomous vessel suited for surveillance and combat missions. Rheinmetall is initially building around 200 units per year at Blohm+Voss, but management says three-shift operations could ramp that to 1,000 units annually if demand materialises. A Starlink link keeps the boats permanently connected. The Hamburg yard was acquired from the Lürssen group earlier this year as part of a four-yard deal, and Rheinmetall plans to turn it into a national technology centre for autonomous maritime systems, eventually building mother ships for drone swarms.

The company is also pushing into missile systems. In April, it announced a joint venture with Destinus called Rheinmetall Destinus Strike Systems, in which it will hold a 51% stake. The venture is slated to be founded in the second half of 2026, pending regulatory approvals.

Two key dates loom. On 7 May, Rheinmetall publishes its first-quarter report, which will test whether margins are holding up despite the costly capacity build-out. Strong operating numbers could refocus investors on the underlying growth story. Five days later, on 12 May, the annual general meeting will vote on a dividend of €11.50 per share, up from €8.10 last year.

Technically, the next support lies around €1,267. A daily close above the €1,380 to €1,410 zone could brighten the near-term picture and open the door to a recovery toward €1,464. Whether the fundamentals are strong enough to pull the stock out of its trough will become clearer when the Q1 numbers land.