Rheinmetall's F-35 Bet and the Cash-Flow Question That Won't Go Away
Published on 08/02/2026 at 09:33 | Redaktion boerse-global.de
The German defence contractor closed Friday at €1,145.00, capping a week that saw the stock advance 10.74 percent — but the rally has done little to settle a fractious debate among investors about whether the company's breakneck expansion is building value or burning it.
At the heart of the dispute is a familiar tension: Rheinmetall is pouring capital into new production capacity at a pace that keeps free cash flow firmly in negative territory, even as the order book swells with headline-grabbing contracts on both sides of the Atlantic.
A Stealth-Programme Foothold in North Rhine-Westphalia
The latest catalyst arrived via the US Army, which awarded Rheinmetall a contract to advance its autonomous logistics capabilities for American forces. That mandate joins a growing stack of major projects, including the British RCH155 programme and a frigate modernisation effort.
Perhaps the most strategically significant development is unfolding in Weeze, North Rhine-Westphalia, where Rheinmetall has begun production as a supplier for the F-35 stealth fighter. The company has invested roughly €200 million in the site, which is designed to turn out 30 fuselage sections annually. A framework agreement secures production of 400 sections over a 17-to-20-year horizon, with the first delivery to the US slated for autumn. The partnership runs through Northrop Grumman and Lockheed Martin, while Germany itself has ordered 35 of the jets. The facility currently employs around 200 people, with plans to double that headcount to 400 by 2026.
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Berlin's Spending Signal Adds Fuel
The broader sector backdrop also brightened this week when Germany's budget committee approved 16 procurement programmes, including four MEKO A-200 DEU anti-submarine frigates with an option for four more, according to the defence ministry. The package also covers a high-energy laser weapon system, multi-purpose combat boats, and a range of ammunition and IT purchases — a signal that European defence spending remains on an upward trajectory.
Papperger Takes Aim at Merkel
Chief executive Armin Papperger used a global security summit to deliver a pointed rebuke of former chancellor Angela Merkel, accusing her of having pushed Germany's defence industry "into the corner of shame" for years. Papperger quoted Merkel as telling him: "We don't really need you — if there's a problem, we call the Americans." He pressed for greater speed and planning certainty from policymakers, pointing to Rheinmetall's construction of a €500 million artillery plant and the ramp-up of annual artillery ammunition capacity from 70,000 to one million rounds — output that has, he said, overtaken the US in conventional munitions.
Two Camps, One Chart
The investment community remains split on what the expansion strategy ultimately means for shareholders. Bulls argue the heavy capital expenditure is the necessary price of working through a record order backlog and securing pricing power through deep vertical integration — a structural advantage in a sector where compliance requirements make outsourcing difficult. Bears counter that a rich valuation combined with sharply negative cash flow is a hazardous mix, and that the market is asking investors to fund a multi-year build-out before seeing the payoff.
The chart tells a story of recovery with a long way still to go. Rheinmetall recently crossed above its 50-day moving average, a short-term positive signal, but trades roughly 22.32 percent below its 200-day average of €1,473.94. The stock has clawed back about 27 percent from its June low, yet remains firmly in the red on a year-to-date basis. Traders are divided: some are taking profits at current levels, while others are waiting for entries below €1,000.
With annualised 30-day volatility hovering near 70 percent, the shares are likely to remain a wild ride in both directions. The operative question for investors is straightforward: the order pipeline looks formidable, but until free cash flow turns positive, the debate over whether the valuation can hold will keep running.
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