Shares in BAE Systems PLC (LSE:BA.) have already had a strong run, but Deutsche Bank believes there’s still fuel in the tank.
Its analysts, who rate the stock 'buy', lifted their target price from 1,900p to 2,170p, reflecting growing confidence in BAE’s long-term outlook following the UK’s latest Strategic Defence and Security Review (SDSR).
What’s changed? Quite a bit. The 2025 SDSR outlines a pivot in UK defence strategy, especially in land and naval forces.
The headline takeaway: Britain plans to expand its fleet of nuclear-powered submarines to 12, which is a big win for BAE, the lead contractor on submarine projects.
This brings welcome visibility to a revenue stream that stretches years into the future.
On land, the new doctrine, shaped by lessons from Ukraine, may lean on BAE’s existing technologies, including its growing interest in unmanned ground and aerial systems.
The company is also well-positioned to benefit from increased government focus on cyber defence and counterintelligence.
But not everything is plain sailing. In the air domain, the UK’s decision to buy more F-35 jets could divert resources away from the Eurofighter Typhoon and slow momentum behind the next-generation GCAP fighter programme, both of which involve BAE.
That said, Deutsche points to stronger sales forecasts between 2028 and 2030, alongside a general re-rating of European defence stocks, as justification for the higher valuation.
In short, BAE has built up a credible growth story, and even at current prices, analysts think the market hasn’t fully priced that in.
The stock, up 70% year-to-date, was down 1.2% late morning at 1,957.5p.