The European Union has made a decisive move to bolster defense spending, unveiling a €150 billion loan program under the “Rearm Europe” initiative on Tuesday, March 4. The plan, announced by European Commission President Ursula von der Leyen, is designed to help EU nations strengthen their military capabilities without straining national deficits.
Von der Leyen emphasized that if member states increase defense spending by just 1.4% of GDP, it could inject a staggering €800 billion into the sector over four years. The program encourages joint defense projects, signaling a clear shift in EU policy, defense is now a top priority.
Rheinmetall positioned to capitalize on the boom
Amid this strategic pivot, Rheinmetall AG (ETR: RHM)—Germany’s leading arms and automotive manufacturer—is emerging as one of the biggest beneficiaries.
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JPMorgan Chase & Co. analyst David Perry has significantly raised his target price for Rheinmetall from €800 to €1,200, citing a new phase of European military rearmament.
“The rearmament phase in Europe is now a reality,” Perry noted, reflecting growing urgency among NATO’s 30 European member states to expand their defense budgets in response to escalating geopolitical tensions.
Major analysts see further upside
Morgan Stanley is even more bullish, raising its price target for Rheinmetall to €1,300—up from its previous €900. The firm maintains an Overweight rating, citing a sharp increase in Europe’s defense spending and Rheinmetall’s expanding market share.
According to Marie-Ange Riggio of Morgan Stanley, the European defense equipment market, currently valued at $46 billion (2% of Europe’s GDP), is set for substantial growth. Rheinmetall, holding 12% of the market in 2024, is projected to increase its share to 18% by 2030 as governments ramp up investment in land-based military capabilities.
Rheinmetall’s stock has already reflected investor confidence. Year to date, shares have surged 92.14%, with a 19.95% gain in the past five days alone. Today, the stock is currently trading at €1,166, up 1.88%.
With European governments prioritizing defense spending and Rheinmetall securing major contracts for Leopard-2 tanks, Puma infantry vehicles, and other advanced military systems, the company is well-positioned for long-term growth. As geopolitical risks rise and the EU accelerates military investments, Rheinmetall’s rally may be far from over.
Featured image via Shutterstock
