Rheinmetall’s Recovery Masks a Deeper Challenge: Automakers Join the Arms Race

Rheinmetall shares rise 9% from May low yet remain down 24% YTD; RSI above 86 signals overbought risk while analysts cut targets amid auto sector competition and macro pressures.

Rheinmetall’s stock has clawed back some ground after hitting a 52-week low of €1,118 in mid-May, closing last Friday at €1,221.40 for a fourth consecutive gain. The near-9% weekly bounce, however, does little to brighten a grim year-to-date picture: the shares are still down roughly 24% since January, and nearly 39% below the September 2025 peak of €1,995.

The rapid rally has pushed the relative strength index above 86, signalling the stock is technically overbought. That leaves it vulnerable to profit-taking, especially with price action struggling to breach a thick resistance band around €1,240 in recent sessions.

Analysts are broadly holding their nerve, even as they slash price targets. The consensus fair value still sits at €1,940.81 — a 58% premium to the current price — but the range has widened dramatically. UBS led the latest round of cuts on Friday, lowering its target from €2,200 to €1,600, while keeping a buy recommendation. Jefferies trimmed to €1,890, citing uncertainties in order intake and operational risks. Barclays, more bullish, stuck with “Overweight” and a target of €2,035.

That divergence between lofty long-term goals and near-term caution reflects a market demanding concrete proof of execution. The first-quarter numbers, released on May 7, offered some comfort: earnings per share rose from €1.78 to €2.18 on revenue growth of 8% to €1.94 billion. Management guides for an operating margin of around 19% for the full year. Investors will be watching the next quarterly report to see whether that figure remains within reach.

A less discussed headwind is brewing outside the defence sector. Major German automakers — Mercedes-Benz, Volkswagen and BMW — are pushing into military business, with Mercedes already supplying trucks to the Bundeswehr. Meanwhile, armoured-vehicle specialist KNDS is exploring the use of automotive factories for tank production. These financially muscular newcomers threaten to erode Rheinmetall’s entrenched market share over time, complicating its growth narrative.

The macro backdrop remains unhelpful. The energy-price crisis triggered by the Iran conflict continues to weigh on German industry, adding pressure to margins across the board. Hensoldt, a domestic rival, has posted modest gains year to date, which analysts attribute to its more defensive positioning.

In the week ahead, geopolitical events could influence sentiment. An industry conference on Ukraine reconstruction kicks off in Magdeburg on May 28, followed by the Ostdeutsches Wirtschaftsforum from May 31, where defence investment is on the agenda. If Rheinmetall’s stock cannot decisively clear the €1,240 resistance in this news-heavy environment, further downside may be in store.