Barclays analysts have highlighted that European defense companies could encounter profit-taking risks in the short term if Ukraine and Russia reach a ceasefire agreement. These companies have experienced significant stock price increases over the years.
Defense stocks have outperformed the MSCI Europe Index by approximately 60% this year, leading investors to question whether valuations have entered a bubble territory. Analysts believe that the positive news regarding anticipated defense spending growth is likely already reflected in current market prices.
Despite this, analysts suggest that any potential downturn should be viewed as a buying opportunity due to the strong structural growth prospects of European defense firms. Recent market movements saw Leonardo's stock drop by 3.4%, Thales (THLEF, Financial) decline by 6.5% to 228 euros, and BAE Systems (BAESY) fall by 2% to 15.44 pounds. Other companies such as Indra Sistemas, QinetiQ, Saab, Dassault Aviation, Fincantieri, Chemring, Babcock International, and Hensoldt also experienced declines.
