Rheinmetall's Naval Woes and NATO Reprioritisation Deepen Investor Doubts as Stock Falls 4.4%

Rheinmetall stock drops 4.42% amid cancelled F126 frigate programme and NATO pivot to air defence; analysts cut targets but order backlog remains strong.

Rheinmetall's shares fell sharply on Thursday, extending a punishing start to the year as the German defence group grapples with a cancelled naval project and a fundamental shift in military spending priorities that is calling its long-term growth narrative into question. The stock dropped 4.42% to €1,016.20, leaving it down 36.55% since the start of 2025 and roughly half below its all-time high near €2,000.

Analyst Jens-Peter Rieck of MWB Research responded by downgrading the shares to "Hold" and slashing his price target from €1,400 to €1,150. The trigger, he explained, was last week's NATO summit in Ankara, which signalled a marked pivot away from heavy land forces toward air defence, drones, and digital surveillance. That strategic realignment directly threatens one of Rheinmetall's key growth bets: the Arminius armoured-vehicle programme.

MWB now reckons that market expectations for Arminius are overblown. Previously, the project was forecast to involve around 3,000 vehicles with a total value of €40 billion, of which roughly €22 billion would have flowed to Rheinmetall. The analysts have cut their volume estimate to just 1,800 vehicles, citing delays in both Germany and Estonia – which recently halted a €500 million tank purchase in favour of investing in drone capabilities instead.

Compounding the pressure, the government has pulled the plug on the Fregatte F126 programme after costs exploded to nearly €18 billion. The decision dealt a severe blow to Rheinmetall's naval ambitions, prompting management to freeze the build-up of some 900 jobs at its Naval Systems unit. Rival TKMS will now build the Meko frigates for the Bundeswehr. The cancellation has further eroded investor confidence in the company's ability to execute across multiple fronts.

Yet not all analysts are turning bearish. Berenberg maintains a "Buy" rating with a €1,600 target, and Bernstein sees fair value at €1,900. The consensus of 15 Wall Street analysts still stands at roughly €1,737 over the next twelve months. Order books, after all, remain exceptionally fat: backlog exceeds annual revenue by a factor of almost eight. New business is still arriving – Morocco recently ordered seven mobile field hospitals for a mid-double-digit million sum, with delivery scheduled for 2027 and 2028. And on Thursday, the federal procurement office awarded a Rheinmetall-MBDA joint venture a contract in the mid-three-digit million range to develop a high-energy laser weapon system, a demonstrator of which has already fired more than 1,000 shots.

Nevertheless, the market is no longer rewarding mere order volume. The Relative Strength Index stands at 39, not yet signalling panic, but the chart looks damaged: the stock trades more than 33% below its 200-day moving average of €1,522.64. If support at €1,000 holds, a stabilisation is possible; if it breaks, the 52-week low near €902 becomes the next floor. The immediate test comes on 6 August 2026, when Rheinmetall reports second-quarter results. Analysts expect revenue of €3.04 billion and earnings per share of €7.10 – numbers that must demonstrate the group can pivot from tank-maker to architect of modern warfare faster than its rivals are gaining ground.