Analysts have predicted renewed growth in the European defense sector. Which stocks will benefit?
The rally, which began back in 2022, faltered in the first half of 2026
Analysts See New Growth Prospects for European Defense Stocks / Photo: Flying Camera / Shutterstock
European defense stocks are set to rise steadily in the coming years thanks to a new wave of rearmament, according to analysts at Barclays and RBC Capital Markets. Their views are reported by Bloomberg. They named several stocks that they believe investors should buy.
Details
On August 11, RBC analysts led by Colin Moody initiated coverage of several companies in the sector with a “Buy” recommendation: this rating was assigned to Rheinmetall shares (which rose 0.7% during trading on August 11), Thales (+0.3%), Leonardo (+0.4%), CSG (+2.9%), BAE Systems (-0.7%), and Saab (+2.7%).
Barclays analysts, led by Afonso Osório, in turn, upgraded their recommendation on Saab shares to “Overweight” (corresponding to a “buy” recommendation) and initiated coverage of Kongsberg Gruppen (which rose 2.5% on August 11), Babcock International Group (which fell 0.2%), and Renk Group (which declined 1%) with the same recommendation. The bank’s analysts remain positive about the sector as a whole but emphasized that investors will need to take a more selective approach, as the “easy money” days are behind us, according to Bloomberg.
“We view the defense sector positively overall, but expect greater differentiation, as transparency, portfolio quality, and project execution efficiency are becoming increasingly important to investors,” Osório wrote.
What Will Drive the Growth of Defense Stocks
Following a rally that began back in 2022, European defense stocks stopped rising and stagnated in the first half of 2026, despite a new war in the Middle East. Investors were wary of buying overvalued assets, even in the face of generally solid financial results, Bloomberg explains.
Both RBC and Barclays see this downturn as an attractive opportunity to enter the sector. European rearmament will drive annual defense spending up by 16% through 2030, with traditional military equipment continuing to attract the vast majority of funding as Europe refocuses on containing Russia, Moody wrote.
"The sector has fallen 13% from its March peak, which, combined with strong fundamental prospects, creates an attractive entry point for the market as a whole," he said.
This article was AI-translated and verified by a human editor
