Rheinmetall’s Stock Trades 77% Below Bullish Targets Even as a German Army Leak Confirms the Need for Its Services

Rheinmetall sells its €2B automotive unit to focus on defence spare parts amid a Bundeswehr crisis, with shares down 26% but analysts seeing 77% upside.

A confidential Bundeswehr readiness report, which surfaced in May 2026, has inadvertently made the case for Rheinmetall’s transformation better than any investor presentation. The document, compiled by the army’s maintenance arm Heeresinstandsetzungslogistik GmbH, reveals that only about half of Germany’s Panzerhaubitze 2000 howitzers are combat-ready. Marder infantry fighting vehicles and Boxer wheeled armoured vehicles also show critical shortfalls, with the primary culprit being a shortage of spare parts. For Rheinmetall, the report reads like a multi-year sales forecast for its service and parts business.

The defence group has just accelerated its bet on that military aftermarket by severing its last substantial civilian link. On 3 June 2026, Rheinmetall signed a binding agreement to sell its Power Systems automotive unit to financial investor Aequita for a provisional purchase price of €350 million. The division, which houses brands such as Pierburg and Kolbenschmidt, generated roughly €2 billion in revenue in fiscal 2025. The deal is expected to close in the fourth quarter of 2026, pending regulatory approvals. Around 6,250 employees worldwide are affected, though Aequita has agreed to take on all staff. The IG Metall union secured a three-year guarantee for jobs and locations.

The clean-up is not without a financial sting. Rheinmetall will book an additional non-cash write-down of approximately €200 million, on top of an earlier €350 million impairment. Chief executive Armin Papperger called the move “historic” for the company. Three sites linked to the KS Huayu AluTech joint venture — Neckarsulm, Walldürn and Langenhagen — will remain as discontinued operations within Rheinmetall for now. The factory in Neuss, however, is to be converted to produce satellites and other defence equipment, a further signal of the group’s total pivot away from civilian markets.

The market has so far shrugged at the clarity. Rheinmetall shares traded at €1,186.00 on Thursday, down 0.35 percent on the day, and have lost roughly 26 percent since the start of 2025. That puts the stock more than 40 percent below its September 2025 high of €1,995. The relative strength index stands at 39.1, while the 30-day annualised volatility has exceeded 53 percent. The gap to the 200-day moving average is nearly 27 percent — a sign of persistent technical weakness.

Several major banks see a disconnect between price and fundamentals. Deutsche Bank reiterates a “Buy” with a price target of €2,100, implying a gain of approximately 77 percent from current levels. Barclays rates the stock “Overweight” and Jefferies also recommends “Buy.” Their conviction rests on the enduring tailwind from Nato defence spending, a €5.7 billion order from Romania, and a recent contract from the Bundeswehr for military trucks worth more than €1 billion.

Rheinmetall has affirmed its 2026 guidance: revenue growth of 40 to 45 percent and an operating margin of around 19 percent for continuing operations. Until the Power Systems sale is formally closed in the fourth quarter of 2026, however, the stock is likely to remain caught between a transformative strategy and a market demanding immediate proof that the new, pure-play defence profile can deliver those numbers in an environment of heightened volatility.